Thread by @CANehaNiharika

#Nifty at all time high & investors are in dilemma whether to buy the Stocks or not.
The fear factor is if I buy at current levels & if markets fall,then the capital would be blocked in losses & will lose Bank FD interest also!
Here’s is a solution.
A 🧵Thread
For Learning!
1/9

Assume u have 6.5lacs & wish to Buy #Reliance but it’s trading at 2722.U find it costlier & wait for the stock to come down to 2600.
It’s a good approach but while u wait for ur desired 127 pts fall in this stock;
YOU ARE LOSING YOUR BANK INTEREST! Isn’t it?
Here we go.
2/9

One may SELL PE of 2600 Strike(Jan Series) of Reliance which is quoting at 29.
Margin Required is 95000.
Qty is 250.
You have sold 2600 Strike PE at 29.
So, most imp is to understand it’s Break-even.
Let me explain ( for learning Purposes only)
3/9

Break-even of my Sold Put Option will be:
2600-29=2571
It means, Worth of 2600 strike Put will be justified at 29 only when #Reliance gives a closing of 2571 on the day of Jan Series Expiry.

Here’s the “Most Interesting” part with two possibilities..
4/9

Case1:
Reliance falls to 2571 level from 2722.
Well,
Step 1:
Take Delivery (Buy) of Reliance at 2571.
(Now you are owing 250 shares at 2571 as per ur Wish-Price.
Step 2:
Exit from Sold PE of 2600 at No Profit No loss(as when Reliance is at 2571, sold PE will b at 29,our SP)
5/9

Case 2:
Reliance doesn’t come to 2600 by Jan series expiry.
Well!
Step 1:
Take profit of 29 x 250=7250
(As Sold PE of 2600 Strike would expire OTM & would be Zero & we hv sold it at 29, so net gain is
29 x 250= 7250.)

7250 is 7.6% of Deployed capital (95k) & most imp is..
6/9

Initially we had 6.5 lacs capital and we used only 95k to initiate this Strategy.
We got 7250 Profit which is 1.1% of our net Capital (6.5 lacs).
If we Repeat this for 12 months, 12% yearly ROI is quite achievable without being on Screen.

Coming to FAQs of this Strategy
7/9

1. What if I take Delivery at 2571 & Stock continues to fall?
- Start selling 2700/2800 CE( a detailed thread in my timeline, you may read) & keep making 1-2% monthly ROI.

Q2. Why to chose Reliance?
-You may chose any F&O stock but should be well versed with Dynamics.
8/9

This strategy is most suitable for those who wish to Buy Stocks at a price of their wish & earn more than Bank FD without being on screen.
Hope this 🧵could add some value.

It was solely for Educational Purpose & Not Buy/Sell Recommendation.
Retweet for Maximum reach.
Thanks
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