Trade: Sell Reliance Industries (RIL) Jan 640 Put at Rs. 2.00 premium
Lot Size of RIL: 250
Total premium collection: 250 * 2.00 = Rs. 500
Brokerage and other costs: Rs. 60
Net Earning = Rs. 460
Margin required (in cash or stocks) for 1 lot= Rs. 25,000
Total return: 460 / 25000 * 100 = 1.84%
Risk: The trade will result in loss below 638. For every rupee fall below this level there will be a loss of Rs. 250 on each lot.
Justification of trade: Reliance Industries is having very strong support at 700 and considering the fact that it is the market leader, any market rally would lift the Reliance stock as well. Even if there is a correction there is a strong safety of 90 bucks from the current market price of 736.