Nse Topper

India WPI inflation declines further, down to 6.55 % Vs 7.47 %

2012-02-14T11:52:00.000+05:30

India WPI inflation declines further, down to 6.55 % Vs 7.47 %

WPI Inflation during the month of January 2012 is at 6.55% . It was at 7.47 % in previous month ( Dec 2011). The data came inline with the market expectation of 6.60%.

Get the chart of Monthly Wpi inflation chart > wpi-inflation-chart

The first requisite of success by Thomas Edison

2012-02-12T20:06:00.004+05:30

The first requisite of success by Thomas Edison

The first requisite of success is the ability to apply your physical and mental energies to one problem without growing weary. - Thomas Edison

Option buyer and seller,formula to calculate profit at expiry

2012-02-11T17:41:00.006+05:30

Option buyer and seller,formula to calculate profit at expiry

Only ITM (In the money ) options will be having worth at expiry date; lets see how to calculate profit during expiry.

Profit calculation formula for option buyers
Don't know terms like, Spot Price - Strike price - Premium? then read > option-trading-basic-terms-explained

Calculation of Profit in Call option

Profit = {Spot Price - Strike price - Premium paid}

Example: Imagine you bought nifty 5000 call option at 100 Rs and Nifty expiry is at 5330. Now lets calculate the profit
Profit = (5330 - 5000 - 100) = 230 , that means you will get 230 points as profit.
To calculate the profit in rupees, need to multiply it with lot size ie. 230 X50 = 11500 Rs

Calculation of Profit in Put option
Profit = {Strike price -Spot Price - Premium paid}

Example: Lets imagine you bought nifty 5000 put option at 100 Rs and Nifty expiry is at 4670. lets see how to calculate the profit in holding the put option.
Profit = (5000 - 4670 - 100) = 230 , in this case also you will get 230 points as profit.
and hence profit in rupees, 230 X50 = 11500 Rs

Profit/Loss calculation formula for option Sellers

What option buyer looses, is the gain of option seller. At expiry option seller gains full premiums in all worthless options like OTM & ATM ,so there is no need to calculate that. But in the case of ITM options, we need to calculate the profit/loss, lets see how it works.

Option seller: Calculation of Profit/Loss in Call option

Profit/Loss = -(Spot Price - Strike price - Premium received)

Lets take the above example itself , imagine you Sold nifty 5000 call option at 100 Rs, Now lets see two conditions of expiry

Expiry at 5330 > Profit/Loss = -(5330-5000-100) = -230 , ie loss of 230 points
Expiry at 5060 > Profit/Loss = -(5060-5000-100) = +40 , ie Gain of 40 points
This is how it works, remember loss of option buyer is the gain of option seller and vice versa.

Option seller: Calculation of Profit/Loss in Put option

Profit/Loss= -(Strike price -Spot Price - Premium received)

The same concept, try it your self .. .

What to look for
Guess you bought 5000 call at 100 rupees premium, you will be in profit only if nifty expires above 5000+100= 5100, ie above 5100. Apply same concept to put options too.

Option trading- basic terms explained

2012-02-09T19:50:00.004+05:30

Option trading- basic terms explained

Must read for beginners > basics-of-option-trading

Call Option,Put Option > read basics

In the money, ATM, OTM > read basics

Option premium - It is the amount of money paid by the option buyer to the option seller in order to make the contract.Options are traded in the exchange based on its premium amount ( like share prices). Example if nifty 5000 call option is trading at 50 Rs, you need to pay 2500 Rs to buy that option ie 50 * 50 =2500. ( lot size of nifty is 50).

Expiry Date - The date on which the option need to be exercised. The option contract doesn't exist after this date.

Strike Price - The price at which the option can be exercised on expiry day.

Spot Price - The current value of the underlying asset is called as the Spot price.

Underlying Asset -It is the financial instrument, on which the options are based. It can be a index,stock etc. and their options are called index options, stock options respectively.

Option Writing - Short selling of an option is called Option writing/ option selling.

Intrinsic and Extrinsic value - Intrinsic value of an option is the actual value of the option at the time of transaction. An options value doesn't consist of its intrinsic value alone, there is another part ie extrinsic value or the time value.

Time Decay - As expiry date becomes nearer, the value of option decreases (because of decrease in time value), this is called as the time decay.

European and American options - These are the two types of options based on the nature of their expiry dates. Read more European and American options

Squaring off /Exercising of an option > Read more options-exercising-and-squaring-off

Implied Volatility > read more about Implied Volatility

Options Spreads - These are the option positions, consisting of combination of different options. Different types of strategies can be adapted based on the market outlook. Read more about option strategies

Option greeks - As you becomes more familiar with options, you will come to know about delta,gamma,vega and theta. These are called as option greeks and option price is moving with the underlying asset based on these variables. Read more about option greeks

Over priced/ Under priced options - Fair value of an option can be calculated using many option pricing models. If current trading value of an option is less than it's fair value then it is called as under priced and vice versa. Read more about different option pricing models

List is incomplete and will update soon.

Option trading strategies- synthetic short stock

2012-02-08T20:52:00.000+05:30

Option trading strategies- synthetic short stock

Synthetic short stock is an option combination strategy, exactly opposite to "synthetic long stock strategy". This is used to generate the same effect as we hold the short position in a stock.

Strategy - Buy ATM Put and Sell ATM Call
ATM = at the money ( read the basics > basics-of-option-trading)

The risk involved is same as in the case of holding short stock ie Unlimited profit potential and Unlimited loss possibility

Lets try an example
Reliance closed today at 860, Lets try a synthetic short position in reliance

ie Buy 860 put at 19.40 and sell 860 call at 25.20 ( today's closing prices ), the effect of this position will be same as we sold reliance at 860 , see the image posted below

Option trading strategies- synthetic long stock

2012-02-08T20:41:00.002+05:30

Option trading strategies- synthetic long stock

Synthetic long stock is an option combination strategy, which is used to generate the same effect as we hold the long position in a stock.

Strategy - Buy ATM call and Sell ATM put
ATM = at the money ( read the basics > basics-of-option-trading)

The risk involved is same as the in the case of holding long stock ie Unlimited profit potential and Unlimited loss possibility

Lets try an example
Reliance closed today at 860, Lets try a synthetic long position in reliance

ie Sell 860 put at 19.40 and buy 860 call at 25.20 ( today's closing prices ), the effect of this position will be same as we bought reliance at 860 , see the image posted below

Tera Hone Laga Hoon - Ajab Prem Ki Ghazab Kahani

2012-02-08T16:47:00.002+05:30

Tera Hone Laga Hoon - Ajab Prem Ki Ghazab Kahani

Gamma delta neutral - hedge your favorite stock using options

2012-02-08T16:20:00.005+05:30

Gamma delta neutral - hedge your favorite stock using options

Earlier there was a post about hedging entire portfolio with stock beta ( read > portfolio-hedging-with-stock-beta), that method can be applied to particular stock also. Today we will talk about another method, which is also good as the earlier one.

Imagine you hold 1000 shares of reliance and do not want to exit in any circumstance because of xyz reasons and there is a fear in market about its quarterly results/ upcoming events. Is it possible to make this portfolio neutral and sit safe if price falls ? Yes, it is possible, read below.

Reliance today's close at 860 and guess you holds 1000 shares ie value of 860,000 RS

Steps to make it neutral > its easy, you can hedge with synthetic shorts ( sell call and buy put). Lets try

Position 1000 shared of reliance at 860

Lot size of reliance > 250 , hence we need 4 lots of synthetic short.

ie sell 4 lots of 860 call at 25.40 and buy 4 lots of 860 put at 20.40 ( prices as per today's close, and there is no problem weather it is 840/860/880/900 strike but selected call & put must have the same strike value,it is to make the portfolio gamma & vega neutral, delta will be neutral as you hold the same number of longs )

Now lets test the position, lets imagine reliance falls to 800 on expiry, ie 60 * 1000= 60,000 loss in longs,
Now lets see the options part ( how to calculate? read >basics-of-option-trading)
Sell calls > gain = 25400 (otm)
buy puts > gain = 39600
Total = 65000 gain

ie, Loss of 60000 in holding stocks, and gain of 65000 in options hedge. Its a perfect hedge. Now check from where this extra 5000 came ? actually its the theta decay.

Caution > Check total delta value before taking position, if we use atm or near strikes there wont be much problem, but deep strikes can make trouble. also do your own research before taking any position.

Future option pricing and arbitrage opportunity

2012-02-08T00:29:00.003+05:30

Future option pricing and arbitrage opportunity

Normally there is a relation between the option prices(same strike) and future prices. ie.

Strike price+ call price- put price = future price

Take example of today's nifty close
5400 call at 75.1
5400 put at 121.75
and nifty futures closed at 5355.2

lets try 5400+75.1-121.75 = 5353.3 .As per our equation it should be 5355.2, there is almost 2 point difference, lets see how we can grab this 2 points with no risk. ( for demonstration of the concept only)

Here nifty future is over priced than the normal

Hence we sell the over priced part ie sell nifty future and take synthetic long ( buy call and short put). In case of under priced futures, we buy futures and take synthetic short (sell call and buy put).

Lets try this case>

Position > Sold nifty at 5355.2 and buy 5400 call at 75.1 and sell 5400 put at 121.75

We want to track the difference ie 5355.2 - 5353.3 = 1.9 = 95 RS ( just only for demonstration)

Test1 > expiry at 5350
Calculation ( as we all know, lot size of nifty is 50)

260,-3755, 3587.5 = 92.5

Test 2 > expiry at 5555
-9990,3995,6087.5= 92.5

Test 3 > expiry at 5000

17760,-3755,-13912.5 = 92.5

See the locked profit, Actually nobody trades for this much low amount, but this is just for a demonstration, try with stocks and if gets a opportunity it will give decent % of safe/risk free profit. Will try to post a good example, and i don't know what happened to the 2.5 Rs, might be a data error.Will post a good example soon, subscribe to feeds :)

Govt discontinues weekly inflation data release

2012-02-02T21:23:00.001+05:30

Govt discontinues weekly inflation data release

As per govt's new decisions, from now on, only Monthly data will be published.. so say bye bye to this page >> food-inflation-chart-weekly-data

Track >> wpi-inflation-chart

Evolution of a trader

2012-02-01T19:45:00.005+05:30

Evolution of a trader

Stage 1 Noob , Trades are based on wild speculations, some gains but majority of losses and ends in total loss.

Stage 2 Had wisdom to passover the stage one, understands that stock market is not a place to gamble and learns some rules to speculate. Some wins and some losses, ends in loss/ minor loss.

Stage 3 Learns to hedge and to minimize the possible risk/loss. trades for a total profit ie major profits but minor losses also

Stage 4 Trades only for profit ie minor profit or maximum profit on each position, not even a single loss.

Stage 5 Not feeling that much pleasure in trades and making money, Writes books and finally retires.

Each stage can take weeks/months/years/decades,depending on the interest to learn,understand and pass to next level. Number of people decreases as levels increase and only few reaches last level.

Find out where you are . . . Happy trading.

Food inflation at -1.03% versus -0.42% WoW

2012-01-27T18:03:00.001+05:30

Food inflation at -1.03% versus -0.42% WoW

Food inflation at -1.03% versus -0.42% WoW

Get chart at >> food-inflation-chart-weekly-data

RBI cuts Cash reserve Ratio (CRR) by 50 basis points

2012-01-24T11:05:00.003+05:30

RBI cuts Cash reserve Ratio (CRR) by 50 basis points

Reserve Bank of India (RBI) cuts Cash reserve Ratio (CRR) by 50 basis points and leaves repo & reverse repo rates unchanged.

Rates Now
CRR - 5.5 % (changed from 6 %)
Repo rate - 8.5 %
Reverse Repo rate - 7.5 %

What is CRR ,Repo & Reverse repo > Read reserve-bank-repo-reverse-repo-and-crr

Nifty technical view intraday update

2012-01-23T12:15:00.000+05:30

Nifty technical view intraday update

Nifty now trading at 5040, with minor loss. It is loosing strength at higher levels and need some correction ie profit booking. Profit booking towards 5000/4950 levels is possible in few days.

Nifty daily charts are turning flat with base around 4950 levels. And weekly charts are in bounce back mood but resistance around 5050/70 levels,so we expect flat market in between these levels for few more days.

This is technical view on nifty, also watch out rbi action.

Last week trading calls performance

2012-01-20T23:42:00.001+05:30

Last week trading calls performance

Buy ITC > 1.5 % gain, turn back there after.

Buy GEShip > 8 % gain ,Hits near target

Sell Lupin > Hits target, just 2-3 % gain

Buy ACC > 5.1 % gain, Hits near target

Buy TVS Motors > 7 % gain, Hits near target

# Gain calculated from high made, if it didn't hit the target.

India Food inflation at -0.42% for the week ended on Jan 7

2012-01-19T11:52:00.002+05:30

India Food inflation at -0.42% for the week ended on Jan7

Food Inflation rises and it is at -0.42% (for the week ended on Jan 7), during previous week it was at -2.90 % ( Dec 31)

Get weekly food inflation chart @ Food Inflation Chart - Weekly data

Nifty technical view intraday update

2012-01-18T10:05:00.000+05:30

Nifty technical view intraday update

Nifty trading around 4970 levels now. During intraday or in1/2 days we can expect profit booking towards the supports levels of 4900/4850.

Weekly charts are in just a bounce back mode, still if 4900/4850 levels forms the base and gives support, we can expect nifty going to the 5050/5100 levels soon.

India WPI inflation falls to 7.47 % in December

2012-01-16T12:06:00.001+05:30

India WPI inflation falls to 7.47 % in December

Wpi Inflation during the month of December is at 7.47 %. It was at 9.11% in previous month ( Nov 2011). The data came inline with the market estimates >wpi-inflation-is-expected.

Get the chart of Monthly Wpi inflation chart > wpi-inflation-chart

December WPI inflation is expected to be between 7-7.50%

2012-01-16T09:02:00.000+05:30

December WPI inflation is expected to be between 7-7.50%

December WPI inflation is expected to be between 7-7.50%

See chart >> wpi-inflation-chart

Stock trading call - Buy TVS Motor

2012-01-15T20:45:00.000+05:30

Stock trading call - Buy TVS Motor

Buy TVS Motor, If holds above 49, targets 54/58 Stop Loss 48.

Stock trading call - Buy ACC

2012-01-15T20:37:00.000+05:30

Stock trading call - Buy ACC

Buy ACC, if it holds above 1120, targets 1144/1184, stop loss 1110

Stock trading call - Sell Lupin

2012-01-15T19:58:00.000+05:30

Stock trading call - Sell Lupin

Lupin can be sold on bounce for the first target of 419, stop 435

Stock trading call - Buy GESHIP

2012-01-15T11:30:00.000+05:30

Stock trading call - Buy GESHIP

Buy GE Ship on dips to 218/220 Levels.. If it holds these levels it can move to 240/245 levels.

Stock trading call - Buy ITC

2012-01-15T11:17:00.001+05:30

Stock trading call Buy ITC

Buy ITC, if breaks and holds above 208 >> Targets 215/225

India Food inflation drops for 10th straight week at -2.90%

2012-01-12T12:27:00.001+05:30

Food inflation drops for 10th straight week at -2.90%

Food Inflation for the week ended on Dec 31 is at -2.90%, during previous week it was at -3.36 % ( dec 24)

Get weekly food inflation chart @ Food Inflation Chart - Weekly data