please mention the exact levels for example buy nifty @5700 and sell 5800 ce simultaneously. and if nifty reaches level 5800 or 5600 how risk and profit will be calculated?
dear dhinesh,
if u buy nifty @6000 and sell 6100 ce at 80 rs simultaneously
at expiry
scenario 1:
nifty @ 6000 to 6100 then ur ce will expire and u ll gain 80 rs plus diff of nifty above 6000:clap:
scenario 2:
nifty above 6100 say 6150 then ur sold call ll be 50 rs
net profit/loss is 80-50=30 rs
plus 100rs from nifty long @6000 total=130 rs:clap:
scenario 3:
nifty below 6000 say 5950
then ur loss from nifty long is 50 rs
but ur call ll expire so ur profit /loss is 80-50=30rs:clap:
scenario 4:
nifty below 6000+ value of ur call
say 5900
then ur loss from nifty long is 100rs
and profit sold from call is 80rs
total profit/loss=-20rs
this method is commonly used to hedge thier long term equity.... to potentially earn some interest against the money invested... in case of sideways market...
happy trading,
raj_dr
