4 Options Strategies - The Collar

I have already posted by bullish view on DivisLAB at http://www.trendgurus.in/2012/10/free-weekly-stocks-divislab.html and I am now posting Bullish THE COLLAR options Strategy for next week

I will open this trade next week in following manner.

Buying 1 Lot (Lot size 500) October Future at CMP 1145
Selling 1 Lot (Lot size 500) OTM (Out the Money) Call 1200 October Series at 9.5
Buying 1 Lot (Lot size 500) OTM (Out the Money) Put 1100 October Series at 12

Limited Profit Potential = Max Profit = 57.50 * 500 = Rs 28750
Limited Risk = Max Loss = 42.5 * 500 = Rs 21250Break Even Point = 1145 (Purchase Price of Underlying) +2.5 (Net Premium Paid) = 1147.5

Disclosure/Disclaimer and FAQ

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4 comments:

  1. how u calculate Limited Profit Potential & Limited Risk please explain it if possible.
    thank you

    ReplyDelete
  2. @ Manoj - Here is the calculation behind it.

    Limited Profit Potential : The formula for calculating maximum profit is given below:

    Max Profit = Strike Price of Short Call - Purchase Price of Underlying + Net Premium Received

    Max Profit Achieved When Price of Underlying >= Strike Price of Short Call

    Limited Risk : The formula for calculating maximum loss is given below:

    Max Loss = Purchase Price of Underlying - Strike Price of Long Put - Net Premium Received

    Max Loss Occurs When Price of Underlying <= Strike Price of Long Put

    I hope you understand Underlying, Strike price, Calls and PUTs. Let me know, if you need more explanation.

    ReplyDelete
  3. Divis Lab Future CMP 1177...Approx 15K profit..Enjoy!!!

    ReplyDelete
  4. Divis Lab Future CMP 1215...Approx 35000 Profit in this call..Enjoy!!!

    ReplyDelete

Thanks for giving your valuable inputs, TRENDGURUS

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