Hello,
We started with this trade of Long Puts and Long Nifty Futures on May 3, 2006, i.e. 10 days back.
Yesterday (Friday, May 12) I was busy with other things and we missed out on a chance of selling NF at 3690-95 which would have been a logical point as per our statergy of delta neutral trading and then we could have bot it back at 3630-35 nifty futures.
The markets gave us a chance but we did not take it. (Its so tempting to go back and modify things in mock trading
). Anyway we won't do that, instead we will consider this as a missed opportunity of adding Rs 6000/- to realized gains.
Today I happened to visit my brokers office, and persuaded the reluctant staff of risk management department to allow me to use the NSE SPAN software to check out VaR, for the trades we are taking.
I was more than surprised to find that for a folio of 200 Long Nifty Puts @ 3600 and 100 Long Nifty Futures, the
margin required was just
Rs 7300/- . Which is fair enough because the folio has minimum risk (being delta neutral).
Now if we can trade with the margin according to NSE SPAN, then the ROI will become more attractive. With this knowledge in hand we will rework the investments to be made for this trade
From previous Post 4/5/6
Margin requirement:
10% for Nifty Futures: 2, 88,000/-
100% for options: 1, 29,600/-
Cost of trade (brokerage etl): 4,400/-
Total Investment so far: 4,22,000/-
Capital: 10,00,000/-
Margin requirements as per SPAN
800 Long Nifty Futures and 1600 Long Nifty Puts SP3600: 58,400/-
Premium for buying 1600 Puts @ Rs 81 : 1,29,600/-
Cost of trade (brokerage etl): 4,400/-
Total Investment so far: 1,92,400/-
We will require additional capital for margin if we are to sell calls and also provision for M2M difference. I personally thing a Capital of Rs 3,00,000/- will be sufficient but to be on the safer side lets make it Rs 5,00,000/-
Capital Required Rs 5,00,000/-
In the light of the above we could have closed the entire trade yesterday itself with our target of 5% ROI.
Have a nice Week end
Regards
Sanjay