Covered Call strategy (Arun Tiwari)

 

1)      Capital required : 5 Lakh, ONLY for STOCK not for NIFTY OR BANKNIFTY

2)      2.5 Lakh – Buy Nifty Index Mutual Fund & 2.5 Lakh Liquid Fund

3)      Pledge 50% = Margin you will get 2.25 Lakh

4)      Reliance CMP = 2120, *Sell Put one lot of RIL @ 1900*

5)      How to decide which price you should sell why only 1900

A)     From Liquid Fund + Nifty Index, you will get around 10% per annum

B)      Means we need 14% additional to get 24% per annum. 14% divided by 12 months = 1.7% per month, 1.7% of 5 Lakh = 5833, which means 5833/250 =  23.33 premium we need

C)      *Now when we checked 24 premium, we can get it only in 1900

6)      When to execute the order : For Feb month expiry, you need to execute the order on 3^rd week of January.

7)      Put an alert, when RIL comes to 1950, *that time SELL 2.5 Lakh portfolio + remove 2.5 Lakh pledge* we need to do before 4 days of expiry day so we have the money in our account* Such incidents happens only 2times in a year, otherwise  you will enjoy the 5883 premium each month

*Let’s calculate the overall profit*

A) There are 2 months where the CMP is 2124 and you are forced to buy 1900-24 = 1876 means 248 per share profit = 248 X 250 = 62000 which is 12.40% of 5 Lakh

B) Remaining 10 month you will enjoy the premium 24 X 250 X 10 = 60000 means 12% of 5 LAKH

c) Base portfolio increase in 10 month 5%

So total of 29.5% per annum profit