Trading Idea: March 2012

Sell ONGC 320 Call at Rs 1.40 Premium

The recent auction of 5 percent govt's stake in ONGC has given very good trading opportunity. The floor price for the auction was set at Rs. 290 which was 3 percent higher than the 29th Feb closing price. As a result the response from institutional investors was muted and LIC had to step in to bail out the govt. 

Now since the auctinn is over and it is clearly visible that there is very little demand for the share beyond 290 - 300 levels, one can write 320 call of ONGC March expiry at the current market premium of Rs 1.40

Return from this trading strategy:

Assuming 1 lot of ONGC (1 lot = 1000) is sold at Rs 1.40

Total premium collected = 1000 * 1.4 = Rs 1400

Total Transaction cost assuming Brokerage cost including STT and other taxes at Rs. 50 per lot = Rs 50

Margin money required: Rs. 42,000 (14% of total call value)

Total return = 1350 / 42,000 = 3.2 % in 1 month

Risk: If ONGC moves past 321.4 and closes above this level then there will be a loss of Rs.1000 for every point above 321.4

Sell Nifty 5500 Feb Call at Rs.18 Premium

Indian Stock Markets have delivered phenomenal return of around 23% in January alone. In this one month the Indian rupee has appreciated by 8.5% (from 54 to 49.50 as on 27th Jan 2012) while Nifty index has moved up 14.5% during the same period (from the lows of 5440 to 5200) generating a total return of 23% in dollar terms.

Considering the above fact InvestorZclub feels that the rally is about end soon and the upside from these level is not significant. Hence InvestorZclub is recommending the following trade:

Trade: Sell NIFTY 5500 Feb Call at the current market premium of Rs.18 

Return from this trading strategy:

Assuming 2 lot of NIFTY (1 lot = 50 NIFTY) is sold at Rs. 18

Total premium collected = 100 * 18 = Rs. 1800

Total Transaction cost assuming Brokerage cost including STT and other taxes at Rs. 50 per lot = Rs. 100

Margin money required: Rs. 39,000 (7% of total call value)

Total return = 1700 / 39,000 = 4.3 % in 1 month

Risk: If Nifty moves past 5518 and closes above this level then there will be a loss of Rs.100 for every point above 5518

Trading Idea: January 2012

The recent developments in the stock market globally suggest that we are amidst a short term rally. Indian stock markets too witnessing some buying interest because of global rally and rupee appreciation against USD.

Considering this InvestorZclub is recommending following trade:  

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.

Opportunity to make 2.5% in 5 days

Considering the recent development in IT sector and the technical setup of IT stocks, there is a good opportunity to make 2.5 percent return in next 5 days using the following trade:

　

Trade: Sell TCS Dec 1200 call at 5.00 premium

Lot Size of TCS: 250

Total premium collection: 250 * 5.00 = Rs. 1250

Brokerage and other costs: Rs. 60

Net Earning = Rs. 1190

Margin required (in cash or stocks) for 1 lot= Rs. 42,000

Total return: 1190/42000 * 100 = 2.83%

Risk: The trade will result in loss beyond 1205. For every rupee rise above this level there will be a loss of Rs. 250 on each lot.

Justification of the trade:

1. The recent development on anti outsourcing of call centre jobs from US will continue to put pressure on Technology stocks. Overseas the share of Cognizant, Accenture and others have corrected 5% or more in one trading session.

2. The check on rupee depreciation and the dampening of the sentiment by RBI that rupee could move beyond 55 levels, has started putting pressure on Technology stocks, particularly TCS and Wipro, which has started under performing the index in past couple of days.

3. TCS Q3 results are expected to be bad due to huge amount of outstanding hedge . Also Q3 is a seasonally weak quarter.

Hence it is highly unlikely that TCS will move past 1200 levels in next 5 trading sessions. As a result the trade is likely to give return of 2.5% plus in 5 trading sessions.

　

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