Introduction of futures and options contracts on 14 additional individual securities

The details of market lot and list of contracts being made available for trading in the above securities will be informed to members separately through a circular on September 5, 2007.

Re: Introduction of futures and options contracts on 14 additional individual securit

Holding Lot sizes in Cash Mkt & Writing Options is Practised by few ,becoz of the irrational Time Decay factor in Indian Developing Options Mkt.

Re: Introduction of futures and options contracts on 14 additional individual securit

Asishda, could you please explain the strategy in simple words entailing all possible outcome.

Like say i expect HAVELLS to move up So i buy in Cash & sell Put (OTM, preferrably at or below a downside support).

Now there are 3 scenarios. The stk
1) moves up as expected
2) moves down
3) remains more or less at the same price

What will be the consequences in each case (w.r.t. my PUT selling)? What is the best & worst outcome? Is there a better strategy? (nothing too complicated please)

And what exactly do you mean by 'irrational time decay factor in Indian options mkt'?

Regards,
Kalyan.

Re: Introduction of futures and options contracts on 14 additional individual securit

This holds if you sell an ATM put.
1. Stock moves up, so you make money on the stock and get to keep the premium from selling the put (since the put will expire unexercised).
2. You lose money on the stock and the put (since the put will now be exercised at the higher strike).
3. You are flat on the stock and get to keep the premium earned by selling the put.

Re: Introduction of futures and options contracts on 14 additional individual securit

ATM was really a stupid idea . Corrected in original post (#3)

Regards,
Kalyan.

Re: Introduction of futures and options contracts on 14 additional individual securit

This holds if you sell an OTM put.
1. Stock moves up, so you make money on the stock and get to keep the premium from selling the put (since the put will expire unexercised).
2. If the stock drops below (strike price minus the premium earned on the put sold), you lose money on the stock and the put, since the put will now be exercised at the strike. If the stock drops below the strike, but does not go below (strike minus premium earned), you lose part of the premium earned.
3. If the stock does not move at all, you are flat on the stock and get to keep the premium earned by selling the put.

Re: Introduction of futures and options contracts on 14 additional individual securit

Thanks Ivan. Just one more thing. Are there any problems in doing this practically in Indian mkts?

Regards,
Kalyan.

Re: Introduction of futures and options contracts on 14 additional individual securit

No, you can do it easily.