These days options are being used to form strategies which clearly define the maximum loss as well as the profit potential. These strategies are formed keeping in mind the condition and sentiments of the stock market.
In markets like the present one where making money seems quite difficult, options are a good trading avenue for those who understand the risks involved. We advice two simple strategies for investors wishing to earn good returns and are comfortable with risks.
Advised Strategies
Buy 1 4800 Put and Sell 2 4700 Puts and 4 4600 Puts of December 2009 Series
This strategy will return nearly 2.5% till December 31st as long as we close above 4500 levels of Nifty in this month. This makes sense this time as Puts seems to be costlier than Calls and give more value for money if we go short on them. The only drawback is that it would be extremely risky if we break 4600 levels. But, as Nifty is almost 10% away from such levels it makes a lot of sense to do this strategic options trade.
Sell 1 4500 Put and 1 5500 Call
Selling these out of money options can give you a decent return of 2% for a range of 4500 to 5500 levels till 31st December. Again the risk is that you will have a loss above 5500 or below 4500, both of which are not likely to happen this month.
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