Stock Options - 26 Nov 2020 Expiry Strategy 01 (Closed with profit)

Disclaimer: Investing in stocks/mutual funds or any other instruments are subject to market risks. Any strategies or trades that are described here are only for educational purpose. Please do your own research or consult your financial advisor before investing.

 

THE STRATEGY (Date: 13 Nov 2020)

Based on the analysis of stock PFC (Power Finance Corporation), the stock is expected to stay bullish for the rest of Nov 2020. Put a vertical spread by selling a put and hedge the position by buying a put.

 

THE SET UP

1) Sell 26NOV2020 95PE@0.6 (1 lot = 6200)

2) Buy 26NOV2020 87.5PE @0.1

MARGIN REQUIRED --> ~54000 INR

 

EXPECTED MAX PROFIT --> ~3000- (Expecting the stock to trade above 95 by end of Nov 2020). The stock has remained bullish through the month/week/day.

 

** RISK MANAGEMENT - EXIT CRITERIA --> Exit the position if loss is ~3% of the invested capital.**

 

 PAYOFF GRAPH

 

RESULT (Update for 17 Nov 2020)

Below is the premium for the day ending 17 Nov 2020.

1) Sell 26NOV2020 95PE@0.25

2) Buy 26NOV2020 87.5PE @0.1

 

Total profit = (0.6-0.25) *6200 = 2170 INR (~4% ROI).

(Please Note: The above profit is inclusive of brokerage and other charges).

Exit the position on 18 Nov 2020. Profit is good and no need to wait till 26 Nov.

 

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Account opening links:

To open account with zerodha, click here --> https://zerodha.com/?c=BR8317

 

To open account with angel broking, click here --> https://tinyurl.com/y3pqj339

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