I want to know if MGL is an effective candidate for choice harvesting. I imply if one have been to purchase a number of MGL in money and preserve promoting out-of-the-money name choices for a gentle revenue.
Relating to choice harvesting, any inventory that’s anticipated to remain sideways generally is a good candidate. Alternatively, if a inventory is trending in both path, it won’t be an ideal concept to promote choices.
In that sense, trying on the chart of Mahanagar Gasoline Ltd (MGL) (₹781.05), it may be supreme to promote choices because the inventory has largely been caught within the vary of ₹680-850 for the previous few months. So sure, MGL, at present juncture is an effective candidate for choice harvesting.
Right here, I’m assuming that by one lot of MGL in money, you imply you’re indicating 800 shares which is the lot dimension of MGL spinoff contracts. Else, the pay-off will be skewed.
You possibly can take into account shorting name choices till the inventory offers a transparent day by day shut above ₹850. As soon as this happens, it’ll almost certainly witness a rally which is able to result in you lacking out on the underlying’s worth appreciation, in case you proceed to carry brief place on name choices. So, sooner or later, it’s higher to cease promoting calls and we might say a day by day shut above ₹850 is that time.
You may also replicate utilizing MGL futures as an alternative of money place, in case you haven’t thought-about that different.
When considered strictly from choices perspective, it’s also possible to go for brief strangle technique for the reason that inventory is charting a horizontal pattern.
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August 06, 2022