Option Trades possible for week Starting July 14

The Stock Market continues to be volatile. While the Nifty did manage to close the week with gains, snapping a seven week losing streak, the gains were small. The Market is under the shadow of detoriating fundamentals: High Inflation, Slowing Industrial growth, Political Instability, worsening American markets…..

Against this backdrop, searching for covered call trades is difficult. If the market falls more, these covered calls will also lose, although the losses will certainly be less as compared to a direct equity purchase.

Since the market environment remians weak, traders may consider buying a bearish option : A Put spread on the Nifty. The trade is:

Buy 4100 PUT July Expiry at 185

Sell 3700 PUT July Expiry at 52

The rates are indicative since these rates may change when you actually set up the trade.

Keep the trade till 31st July when the options will expire. The cost is: Rs 133 per unit which is also the maximum loss. The maximum profit per spread is Rs 267 per unit .The maximum profit will come if the Nifty is at 3700 or lower on July 31.

Note that the lot size for Nifty options is 50, therefore you are trading in 50 units.