Consider the following:
Nifty closed yesterday at 4841.60 (June 01). Its 'Put' asking rates for June 28 settlement were:
Strike Price Rate (rounded off)
4900 - Rs 172 4800 - Rs 125 4700 - Rs 89 4600 - Rs 63 4500 - Rs 44 4400 - Rs 29 4300 - Rs 19 4200 - Rs 12 4100 - Rs 7.50, Volume (least of the lot = 18529 for the day).
The market lot the above is 50. So a position in each costs (or yields) price X 50.
The game that I'm trying to suggest is a
pretty standard one which is played by many. I'm just suggesting that we start a fund sort of operation and play it too. I'm fairly confident.
Consider the maths:
Let we sell the 4200 strike price Put today at Rs 12. We get an inflow of Rs 12 X 50 = Rs 600.
For this we have to submit as security an amount of money = 35,000/- (exchange rules).
Opportunity cost of this money at bank FD rate of 10% = 3500 p.a. = approx. Rs 300 p.m.
Hence cost of funds = 300, and inflow = Rs 600/- which is secure as long as Nifty doesn't breach 4200. Return on money = Gain/cost = 300/300 = 100%.
Alternative method, gain = Rs 600 X 12 = Rs 7200/35000 = 20.57% annualized.
For a meaningful no., multiply by 100, both 35000 & 600 & 300, we get, 35L security, 60k inflow & 30k profit income.
I would suggest we start with a smaller amount, discuss and make our bets.
Better still invite
people to take such good odd bets available everyday.
Regards
PS. At the 4300 strike price (which too is a fair bet), the returns jump to:
19 X 50 = 950 minus cost 300 = Rs 650 profit for June per put sold. Return = 22.29% annualized.
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