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On the hedge
Selling Satyam 160 calls may pay
Anup Menon
THURSDAY's trading saw most equity puts gaining value in line with the market sentiment in the cash market.
The most active options during the day continued to remain Satyam Computers and ACC. Satyam Computers again notched the top five spots in terms of most traded contracts.
The January 280 Satyam put attracted trading interest with 249 contracts. The put costs around 17.50. As recommended on Wednesday investors who had written the option would find them in profitable territory. The option is ITM.
Investors can consider using a call spread by buying 260 calls and selling 240 calls. The probability of the position being profitable works out to around 71 per cent.
Investors can also consider constructing a strangle by using the 300 call and the 280 put. The profitability of that strategy also works out to around 71 per cent.
Options on cement major ACC was also actively traded during the day.
The most actively traded contract was the January maturity contract with a strike of 160. The option is ITM. The option was last priced at 11.8 points. Investors can consider selling the call. The probability of the trade being profitable is 73 per cent.
The put option on ACC with expiration in January and a strike of 170 also attracted some trading interest. The put costs 3.65 points. Investors can consider taking selling the put. The probability of profiting form the trade is 72 per cent.
Investors can consider constructing a put spread using 160/170 puts. Buy 160 puts and sell 170 puts. The probability of the trade being profitable is high at 84 per cent.
Trading activity in Nifty index options during the day was relatively low.
The most actively traded index option was the 1100 call with maturity in January. Total traded volumes stood at 95 contracts.
Investors can also consider selling the 1080/1100 puts. The options last cost around 8.90 points and 20 points respectively. The probability that the trades will be profitable works out to 60 per cent and 71 per cent respectively.
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