My doubts

Suppose I buy Nifty Beas (20 Nos = Mini Nifty), can I play covered call strategy and short sell OTM calls? If the premium increases nifty beas would cover up the losses and if the premium declines I would have that as profit.

20 Nifty Beas = Rs. 100000/-
APR PE MiniNifty 5300 = Rs. 70/-

Hence if I sell APR CE MiniNifty 5300 I may gain Rs. 1400/- about 1.1/1.2% deduction commission etc.

Is the above possible? Moreover is that viable considering the commission etc?

Prasham

10 units of Niftybees equals one unit of Nifty. If you want to play a covered call on one lot of Nifty options you need to hold 500 units of Niftybees. For one lot of Mini Nifty options you need to hold 200 Niftybees. No margin is given by brokers to buy niftybees as it is a exchange traded fund. Which means you have to pay the full amount to buy the niftybees. The very reason for trading in futures and options is leverage. You lose that in your strategy. Besides options on Mini Nifty have no volumes and the spread is crazy at times.

Which future lot has smallest value? I mean current value of Nifty lot is about 2.5L is there any stock that has lower lot value?

Besides you need 25K margin for selling one lot of Nifty(50 units). Add that to your cost to calculate the returns.

Oops that's the final blow to this calculation. Earning of just about 1% that too in about 45 days is too low. Instead I would make an FD

This is, what is charged by RKG.

Columbus, along with the initial margin, brokers charge exposure margins which is at 3% of notional value of index contracts. That roughly works out to another 7500/- per lot bringing the per lot of Nifty margin to 25K. Please confirm with the broker or check the contract notes for confirmation.

Hi TT ,

You are correct.Here is contract note.

----------------------------------------------------------------

Prasham, If I further give another blow to your COVERED CALL STRATEGY, then
Do you know Cover Call = Naked Short Put position ?

Please explore and find out why I say this. I am sure, you wouldn't dare to go ahead with Naked Short PUT position..
but you are ready to trade covered call..

Difference is the missing knowledge.

If you are new, then my suggestion will be to do
1) Define a strategy, trading plan
2) Do some backtesting
3) Do some paper trades.

And when u find that in your idea is making money in step 2 and step 3 above, then start risking real money..

all the best.