7/31/2019 Derivatives Strategy

1/3

SCENARIO Strategy 1 (Bull call spread)

POSSIBILITIES PROFIT/LOSS

closing < 5400 - difference paid

5400 < closing < 5500 (closing - 5400 ) - difference paid

5500 < closing 100 - difference paid

Strategy 1 - Payoff as on expiry

-3000

-2000

-1000

0

1000

2000

3000

6100

5800

5500

5200

4900

4600

4300

4000

3700

Nifty Strikes

Profit/Loss

Nifty Spot : 5380

DERIVATIVE STRATEGIES July 19, 2010

ACTION STRIKE PREM. BREAKEVEN PT. AT EXPIRY Max. profit/loss

Buy July call 5400 49 Profitable when nifty is above 5435 Max. profit: 3250Strategy 1

Mildly Bullish Sell July call 5500 14 Max. loss: 1750

Buy July put 5400 72 Profitable when nifty is below 5363 Max. profit: 3150Strategy 2Mildly Bearish Sell July put 5300 35 Max. loss: 1850

Buy July call 5500 15 Profitable when nifty is above 5550 Max. profit: UnlimitedStrategy 3Volatile Buy July put 5300 35 Profitable when nifty is below 5250 Max. loss: 2500

Sell July call 5500 15 Profitable when nifty is above 5250 Max. profit: 2500Strategy 4Range Bound Sell July put 5300 35 Profitable when nifty is below 5550 Max. loss: Unlimited

Strategy 1 Nifty bull call spread

View Mildly bullish on market.

Buy Nifty July call 5400 at 49Action

Sell Nifty July call 5500 at 14

Premium

difference35

(Higher premium minus lower

premium)

Total initial

cost1750

(premium difference x 50 lot

size)

Break-even pt. 5435 Breakeven pt. = Lower strikePlus premium difference

Max. profit 3250

(difference bet. Two strikes)

minus (premium difference) x

50 lot size

Max. loss 1750 Limited to total initial cost

Execution 42

Do not execute strategy for

more than given premium

difference

7/31/2019 Derivatives Strategy

2/3

SCENARIO Strategy 3 (Long strangle)

POSSIBILITIES PROFIT/LOSS

closing < 5300 (- closing + 5300 ) - premium paid

5300 < closing < 5500 - difference paid

5500 < closing (closing - 5500 ) - premium paid

Strategy 3 - Payoff as on expiry

-20000

0

20000

40000

60000

80000

100000

6100

5800

5500

5200

4900

4600

4300

4000

3700

Nifty Strikes

Profit/Loss

Strategy 2 Nifty bear put spread

View Mildly bearish on market.

Buy Nifty July put 5400 at 72Action

Sell Nifty July put 5300 at 35

Premiumdifference 37 (Higher premium minus lowerpremium)

Total initial

cost1850

(premium difference x 50 lot

size)

Break-even pt. 5363Breakeven pt. = Higher strike

minus premium difference

Max. profit 3150

(difference bet. Two strikes)minus (premium difference) x

50 lot size

Max. loss 1850 Limited to total initial cost

Execution 44

Do not execute strategy for

more than given premium

difference

SCENARIO Strategy 2 (Bear put spread)

POSSIBILITIES PROFIT/LOSS

closing < 5300 100 - difference paid

5300 < closing < 5400 (- closing + 5400 ) - difference paid

5400 < closing - difference paid

Strategy 2 - Payoff as on expiry

-3000

-1000

1000

3000

5000

6100

5800

5500

5200

4900

4600

4300

4000

3700

Nifty Strikes

Profit/Loss

Strategy 3 Nifty long strangle

ViewHighly volatile market, expecting break

out either side

Buy Nifty July call 5500 at 15Action

Buy Nifty July put 5300 at 35

Premium paid 50 (sum of two premiums)

Total initial

cost2500

(premium paid x 50 lot size)

Break even pt.

Profitable if nifty on expiry isabove upper break even or

below lower break even

Upper break

even5550

Higher strike plus premium

paid

Lower break

even5250

Lower strike minus premium

paid

Max. profit Unlimited

Max. loss 2500 Limited to total initial cost

Execution 53

Do not execute strategy if

premium received is more then

given total premium

7/31/2019 Derivatives Strategy

3/3

NOTE:* All the above mentioned strategies are just for easy referral for different market views mentioned. One can also opt for strikes other than mentioned

n these strategies)

* All calculations are as per Premium price/premium difference given in the example and it may vary according to change in premium price/premium

difference* Selling/writing an Option would attract margin requirement, for further details refer FAQ)

Strategy 4 - Payoff as on expiry

-100000

-80000

-60000

-40000

-200000

20000

6100

5800

5500

5200

4900

4600

4300

4000

3700

Nifty Strikes

Profit/Loss

SCENARIO Strategy 4 (Short strangle)

POSSIBILITIES PROFIT/LOSS

closing < 5300 (closing - 5300 ) + premium rec

5300

< closing

< 5500 + Premium rec

5500 < closing

(- closing

+ 5500 ) + premium rec

Strategy 4 Nifty short strangle

ViewRange bound market, expecting Nifty to

remain in range.Sell Nifty July call 5500 at 15

ActionSell Nifty July put 5300 at 35

Premium rec 50 (sum of two premiums)

Total initial

credit3050

(premium paid x 50 lot size)

Break even pt.

Profitable if nifty on expiry is

between upper break even &

lower break even

Upper break

even5550 Higher strike plus premium rec.

Lower breakeven 5250 Lower strike minus premiumrec.

Max. profit 2500 Limited to total initial cost

Max. loss Unlimited beyond breakeven pts

Execution 48

Do not execute strategy if

premium received is less then

given total premium

DISCLAIMER: The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or

distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI Securities Limited. "The author of the report does not

hold any investment/open position in any of the companies mentioned in this report. ICICI Securities Services Ltd (I-Sec) may be holding a small number of shares/ an open position in the

above referred companies as on the date of release of this report." This report is based on information obtained from public sources and sources believed to be reliable, but no

independent verification has been made nor is its accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and may not be used orconsidered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing in this report constitutes investment, legal,

accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in

this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific

recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate the investment risks. ICICI

Securities Ltd and affiliates accept no liabilities for any loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance.

Actual results may differ materially from those set forth in projections. ICICI Securities Ltd may have issued other reports that are inconsistent with and reach different conclusion from the

information presented in this report. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state,

country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities Ltd and affiliates to any

registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors.

Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.

ICICIdirect.com Derivatives Desk

ICICI Securities Limited,

7th Floor, Akruti Centre Point,

MIDC Main Road, Marol Naka

Andheri (East)

Mumbai 400 093

research@icicidirect.com