Bongaigaon closed at 81.45, A mild bearishness short term is visible in this scrip. The ideal spread would be 80/85, or if you are more bearish or adventurous you could go for the 75/80 spread.
The Lot size, ie, the contract size is 2250 for Bongaigaon Refinery. So here is our trade:
Trade Number 1
Buy 1 Lot of Bogaigaon Sep 85 Call @ 1.4 for a total cost of Rs.3150
Sell 1 Lot of Bongaigaon Sep 80 Call @ 3.95 for a total credit of Rs.8887.5
Total Credit is Rs.5737.5
Total Risk is Rs.5512.5
Trade Number 2
Buy 1 Lot of Bongaigaon Sep 80 Call @ 3.95 for a total cost of Rs.8887.5
Sell 1 Lot of Bongaigaon Sep 75 Call @ 8 for a total credit of Rs.18,000
Total Credit is Rs. 9112.5
Total Risk is Rs. 2137.5
All prices are the close of Friday 9 Sept. Lets assume we have this trade on and follow it through the coming days.
DIsclaimer: This is a theoretical trade and not an investment advice. Please use your discretion.
3 comments:
Hello Bala,
One way could when the spread gets narrower. Or you could wait for the expiry.
In case no. 1 , if the stock closes below 80 you get to keep all the credit you have. The other way to close would be as the spread(which was 2.55 (4.95-1.4)to begin with) narrows say to 1.
Similarly in case 2, except that the stock has to close below 75.
Hi Bala,
It is a pleasure to see someone really interested in the nuances of options trading. As I said we are putting up this strategy on the assumption that the scrip will move down. If it moves up you have a loss as you have pointed out.
If the situation changes we have to modify the trade which I hope to show you as the market moves. Please be patient :)
Learning process is always better if done slowly.
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