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5 Mantras for Trading in Options

5 Mantras for Trading in Options
by 5paisa Research Team 31/08/2021

5 Mantras for Trading in Options

 

 Buy unlimited profit potential and limited downside potential:  If the stock moves in the desired direction, then you stand the chance of making unlimited profit. If it moves in the opposite direction, then you only lose the premium that you paid.

 Sell (Write) limited profit potential and unlimited downside potential: If the stock moves in the desired direction, your gain equals the premium amount you received when you sold the option. In that sense, your upside is limited. If it moves in the opposite direction, your losses can be unlimited.

 Options give you rights: When you buy a Call option, you buy the right to purchase the stock at a particular price (strike price). When you buy a Put option, you buy the right to sell the stock at a particular price (strike price).

 Spreads: You can create option strategies, call spreads, that can limit both the upside and downside. These strategies entail buying / selling multiple options (Call or Put) at different strike prices. By spreading them across price levels, you ensure that both your upside and downside are limited.

 Expiry: Every option contract is valid only for a particular period of time, after which it ceases to exist or expires. For index options, expiry will be as follows:

Last Thursday of the expiry month for the monthly, quarterly, and half-yearly contracts
 

Thursday of the expiring week for weekly expiry contracts
For stock options, expiry will be as follows:

 

Last Thursday of the month
For both, if the last Thursday is a trading holiday, then the previous day becomes the expiry day.

 

Log in to www.5paisa.com to start trading options.
 

 

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100% Peak Margins Kick-In From 1st September 2021

Peak Margin Rules by SEBI
31/08/2021

Effective Wednesday, the 1st September 2021, the fourth and final phase of the SEBI ordained peak margining system will kick in. When the peak margining system was introduced in September 2020, it had raised a furore with brokers and traders complaining that it would result in drying up of intraday volumes. To facilitate the adjustment to x`the change, SEBI implemented the peak margins in 4 phases as under.

The Updated Peak Margin Rules by SEBI

Phases

Effective from

% of Peak Margins

Phase 1

December 2020

25% of Peak Margins

Phase 2

March 2021

50% of Peak Margins

Phase 3

June 2021

75% of Peak Margins

Phase 4

September 2021

100% of Peak Margins

All About the New Rules for Peak Margin Implemented by SEBI

Peak Margins brought about 3 major changes. SEBI stipulates margins for all F&O and cash positions. If, for example, the margins for 1 lot of Reliance Futures is Rs.180,000, then effective 01-Sep, the entire amount has to be collected upfront. Secondly, margins will be also applicable on sale of demat shares, unless the trader marks advance pay-in. 

Lastly, the peak margins will be determined by taking 4 trade snapshots during the day and calculating the highest value as the peak margin. There will be stiff penalties for failure to meet this obligation by brokers. This effectively means that brokers funding the margins of clients intraday will no longer be possible under the peak margining system.

The objective of SEBI in the entire exercise of peak margin system was to reduce speculation in the market so that retail investors are not caught on the wrong foot in volatile markets. The protests, especially from bodies like ANMI, are that the volumes will dry up in the intraday market, but we are yet to see evidence of that. 

From the traders perspective, they must be prepared to pay up margins upfront for any position in the market. For the brokers, this surely reduces the risk of open positions since they would be covered by margins for peak risk.
 

 

Next Article

A New Addition to Rakesh Jhunjhunwala's Portfolio?

Rakesh Jhunjhunwala to Invest in Syska LED
31/08/2021

For a long time, Syska LED has been a prominent advertiser in the mass media. Syska LED is currently a privately held company, with the promoting Uttamchandani family controlling the business. In a recent development, it emerges that ace investor Rakesh Jhunjhunwala has invested in Syska LED through RARE Enterprises. 

Also Read: Rakesh Jhunjhunwala's Portfolio 

Will Rakesh Jhujhunwala Invest in Syska LED?

While the details of the size of the stake or the deal value are not yet made public, what has emerged is that the term sheet has already been signed between the Uttamchandani family and RARE Enterprises. Rakesh Jhunjhunwala’s flagship has already made 15% of the committed investment and the balance amount is slated to be invested in Syska LED over the next 60-days.

The Uttamchandani family started off as distributors of T-Series Audio cassettes and CDs but subsequently diversified their focus into electronic product categories like LED, Personal Care Appliances, Mobile accessories, home appliances etc. The underlying theme of Syska LED has been to focus on products that are environment friendly and also save electricity bills for the average households in India.

This is one more in the long list of private investments that RARE Enterprises plans to diversify its investment portfolio beyond the realm of listed stocks. It may be recollected that last month, Rakesh Jhunjhunwala had also announced investment in launching an airline company. The association will also help catapult Syska into the next phase of growth.

For Syska LED, this association brings three distinct advantages. Firstly, it gives them the much needed funds and 360 degree expertise for scaling up their business. Secondly, this association would automatically make a number of marquee qualified institutional investors also interested in Syska LED. Above all, this could pave the way for eventual IPO and listing of the company in the coming years.

Next Article

Ola In Talks With Investment Bankers for $2 Billion IPO

Ola IPO Price, Date
IPO
31/08/2021

With the IPO season ready for digital plays, big boys like Ola cannot be too far behind. It is reported that Ola is in advanced discussions with Citigroup, Morgan Stanley, JPM and Kotak Mahindra Capital to lead manage its proposed IPO. The final list of BRLMs will be finalized ahead of the DRHP filing. Ola is expected to file for an IPO in the range of $1.5-2.0 billion around October this year.

Ola IPO Initial Details

An issue size of nearly Rs.15,000 crore would put its IPO on par with Paytm which is also planning to tap the IPO market in the current fiscal year. With the IPOs of Zomato and CarTrade getting a good response, a slew of digital plays like PolicyBazaar, MobiKwik, Paytm and Nykaa are preparing for IPOs. All these IPOs are expected to happen during the current fiscal.

Also Read: Upcoming IPOs in September 2021

Ola is a cab hailing service which was launched in 2010 by Bhavish Aggarwal on the lines of Uber in the global markets. Since 2010, Ola has raised nearly $4 billion and the proposed IPO is likely to look for valuations of $8-9 billion. During the pandemic, Ola had to let go many of its staff as services were shut. However, now its cab hailing is operating normally.

In July this year, Ola had raised $500 million from Temasek and Warburg Pincus. Ola counts some formidable names like Softbank, Tiger Global and Steadview among early investors. While the dates for the IPO are not yet known, the filing of DRHP is expected in October. That means, the actual IPO could happen either by December this year or in the early part of next year.

The phenomenal success of the Zomato IPO has given confidence that loss-making digital plays have an institutional and retail appetite in India. However, Ola could consider a simultaneous listing in India and abroad.

Read Now: Upcoming IPOs in 2021

Next Article

MapMyIndia To File for Rs.1,200 Crore IPO

MapMyIndia IPO Price, Date
IPO
31/08/2021

MapMyIndia is a homegrown story of a digital geographical mapping company that today powers the likes of Apple and Alexa with digital mapping solutions. MapmyIndia, a 25 year old company, may not be a popular consumer brand, but it has been one of the consistently profitable digital brands in India. MapMyIndia now plans to file its DRHP with SEBI for a Rs.1,200 crore public issue.

All We Know About MapMyIndia IPO

MapmyIndia has some formidable backers including Qualcomm, Wal-Mart and PhonePe. These three players will also take a partial exit from the company via the OFS, which will be part of the IPO. Zenrin, a leading Japanese map publisher, also has a strategic stake in MapMyIndia. 

Also Read: Upcoming IPOs in September 2021

Over the last few years, MapMyIndia has been consistently reporting top line revenues of above Rs.160 crore with a net profit margin of 20-25% on an average. Qualcomm was one of the early investors in MapMyIndia when it invested $9 million in 2009. Later Zenrin invested $30 million in 2011 followed by $1.5 million from Flipkart in 2015.

MapMyIndia IPO looks to be prompted by the government decision to liberalize mapping and make geospatial data freely available to Indian companies with requisite checks and balances. The promoters have confirmed that the pandemic led to rapid adoption of digital modes of communication as the default setting. That opened up huge opportunities for MapmyIndia.

MapmyIndia works closely with over 5,000 enterprises in offering them geographical mapping services. The IPO will, apart from giving an exit to early investors, also look to leverage the “Atma Nirbhar” campaign of the government of India, wherein preference will be given to Indian companies. 

Currently, MapMyIndia has a large automobile client franchise but it will also look to expand its franchise of travel, tourism, telecom and defence. The IPO will be a combination of a fresh issue and an offer for sale.
 

Read Now: Upcoming IPOs List in 2021

Next Article

NSE to Introduce 8 Stocks in F&O from October 2021

8 Stocks in F&O from October 2021
31/08/2021

The National Stock Exchange (NSE) vide its circular dated 31st August, has announced the inclusion of 8 more stocks in the list of stocks eligible for F&O trading. The inclusion of these 8 stocks will, of course, be subject to the fulfilment of eligibility criteria of Quarter Sigma Computation Cycle of September 2021.

The list of 8 stocks to be included in F&O effective from 01-Oct:
 

Serial No.

Company Name

NSE Code

Nature of Business

1

Abbott India Limited

ABBOTINDIA

MNC Pharmaceutical and healthcare vertical

2

Crompton Greaves Cons

CROMPTON

Electrical goods for household use

3

Dalmia Bharat Limited

DALBHARAT

Cement Manufacturer, 4th largest capacity

4

Delta Corp Limited

DELTACORP

Gaming, Casino and the Hospitality business

5

India Cements Limited

INDIACEM

Largest South-based Cement Manufacturer

6

JK Cements Limited

JKCEMENT

Cement maker and part of Singhania Group

7

Oberoi Realty Limited

OBEROIRLTY

Real estate developer based out of Mumbai

8

Persistent Systems Ltd

PERSISTENT

It enabled software development company

The exchange will communicate the specific details of the F&O contracts like market lot, scheme of strike prices and quantity freeze limits on 30-Sep, a day before the start of F&O contracts on these stocks.

The decision to add or remove stocks from the F&O is based on prescribed eligibility criteria and there is a stock selection committee that deliberates and evaluates whether a stock fits into all these criteria before admitting a stock for inclusion in the F&O list.

Normally, inclusion in F&O adds to the liquidity of the stock since a fairly large chunk of volumes is created by cash-futures arbitrage. Stocks included in F&O are also not subjected to stock-level circuit filters.

Currently, there are 3 indices (Nifty, Bank Nifty and Nifty Financial Services) and 172 stocks on which F&O trading is permitted. With the addition of these 8 stocks, the eligible F&O stock list will go up to 180.