Option Trades for week starting July 7

After many weeks of a down move, a number of FNO stocks have made a DOJI pattern. When a DOJi comes after a sustained trend up or down, the message is of uncertainty. In this case, the market has become uncertain on further downside in these stocks.

Bajaj Hindusthan (close: 175.65) is one such FNO stock which has a DOJI in its weekly chart. The July 180 Call Option is trading at Rs 9/-.

A covered call setup may be executed as under:

Buy 950 shares of Bajaj Hindusthan @ 176 approximately.

Sell One call 180 strike for July @ 9 approximately.

Cost of Share after deducting call premium: Rs 167.

The breakeven is also Rs 167, which means that the shares will lose money if price goes below 167. You should take the trade only if you are willing to buy Bajaj Hind @ 167.

Maximum profit is Rs 13/- per share. This gives a return of 7.78% on a one month investment. The annualized return is 93.36%