Friday, July 13, 2007

Nifty/Sensex on the Run- Things to keep in Mind before Writing Options

Though the profit potential of writing an option is limited, it can cause unlimited loss. However considering the Indian Scenario the most important point which needs to be considered is -ALL BREAKDOWN OF NIFTY OR SENSEX i,e. POTENTIAL CRASH HAPPENED BETWEEN 1ST TO 18TH OF EVERY MONTH. On other days Index either progressed or consolidated within the stipulated price frame.

We do not say that history will repeat every time but this gives you a confidence in case you are interested in writing a put option.

On Nifty- Nifty Put written at start of this month when it was above 60 is now at 9. In case anyone want to cash out they can do so and use the capital elsewhere. We are now interested in writing a call option to capitalize on the stretch of Index. However here one needs to be careful because a small fall in index, one needs to immediately lock its profit and get out. I would advise to wait and have a re-look at nifty on Monday.

Good Luck                                                              

Related Posts by Categories

No comments:

Blog Archive

  © Blogger template 'Perfection' by 2008

Back to TOP