Live Option Strategies – LONG STRANGLE to Take Advantage of Expected Rise in Volatility on Elections
Buy April 2014 Nifty 7100 Call Option for Premium of Rs.5.3. Implied Volatility of 12.74%.
Buy April 2014 Nifty 6300 Put Option for Premium of Rs.7. Implied Volatility of 18.76%.
Total Cost for the Strategy for 1 lot of Put and Call Options is equal to Rs.12.3 multiplied by lot size equal to 50 is Rs.615.
Volatile Market gives either side movement towards 6300 or 7100 till April expiry.
Expect the total premium of Call and Put Option taken together to go ahead of Rs.12.3 till Rs.24 for a return of Rs.24-Rs.12.3= Rs.11.7 multiplied by the lot size of 50. Total Gain is equal to Rs.585 that returns 95.12% for the Strategy.
Profit Potential 95.12%. Maximum Possible loss Rs.12.3 for one lot size of 50 of Nifty Index. Do not put Stop Losses in this strategy as combined cost for both the options is minimal.
Our earlier strategy of Long Strangle- (April 2014) – Buy 6800 Call and Buy 6200 Put has given 21.95% gains on an investment of Rs.4100.