Weekly Strategy Update
Live Option Strategies – LONG STRANGLE to Take Advantage of Expected Rise in Volatility on Elections
April 2014 Nifty 7100 Call Option Premium at Rs.3. Implied Volatility of 13.87%.
April 2014 Nifty 6300 Put Option Premium at Rs.2.3. Implied Volatility of 21.3%.
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. Current total price of the Options is equal to Rs.5.3 that gives a loss of Rs.7 multiplied by the lot size of 50 is equal to Rs.350 for the strategy. The Strategy has given -56.91% return since recommendation.
Hold on to the strategy as Volatility in the Market is expected to give 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 say till Rs.24 for a return of Rs.24-Rs.12.3= Rs.11.7 multiplied by the lot size of 50 for total gain to be 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.