Equity Derivatives - Research

India
Reliance: Collar Strategy
Strategy: Buy one Sep Fut. @ 805-806 and one Sep 800 PE @ 20-21 and sell one Sep 840 CE @ 10-11. Breakeven Point: 817 Lot Size: 250. Maximum Profit: Rs. 5,750 Maximum Loss: Rs. 4,250.

Hybrid Strategy Report

September 02, 2011

Source: Iris Spider Software

Derivatives Action: Reliance futures saw closure of 1.39% in open interest in the last trading session while since last Fridays session the stock has shed 5.71% in open interest indicative of short covering. Also, historical volatility of the stock is at 43.4% which is above the 50 day moving average and is at a one year high. High volatility levels along with short covering seen close to crucial supports suggest that volatility could subside and the stock is likely to trade with a positive bias in the coming sessions. Technical Outlook: On the technical front, the stock has broken its short term resistance placed at 800 levels and is trading above its 20 day moving average. Also, the daily MACD and 14 day RSI are in the buy zone suggesting further upsides towards 835 to 840 levels.

Open Interest Accumulation

Payoff at Expiry

Source: NSE Source: Karvy F&O Research

Karan Bhalla Karan.bhalla@karvy.com Ph.:+91-9885178779

Disclaimer & Disclosures: This report must be read with the disclosures and the analyst certifications in the Disclosure appendix, and with the Disclaimer that form part of it.

Karvy F&O Research is also available on Bloomberg, Reuters, Thomson First Call and CapitalIQ

Hybrid Strategy, Sept. 02, 2011

Breakeven Point Calculation: Breakeven point = Price of futures + Net premium paid. = 806+11

Maximum Profit

= Strike price short call Price of Futures Net premium paid. = (840-806-11)*250 = Price of Futures + Net premium paid Strike Price of Long put. = (806+11-800)*250

Maximum Loss

Strategy Greeks: Strike Sep 800 PE Sep 840 CE

Source: Bloomberg

IV 15.5 34.5

Delta -0.44 -0.26

Theta -0.46 0.47

Vega 0.86 -0.69

Gamma 0.0063 -0.0059

KARVY DERIVATIVES DESK

Shomesh Kumar Head-Equity Derivatives shomeshk@karvy.com 9849809008

Disclaimer
The information and views presented in this report are prepared by Karvy Stock Broking Limited. The information contained herein is based on our analysis and upon sources that we consider reliable. We, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and we are not responsible for any loss incurred based upon it. The investments discussed or recommended in this report may not be suitable for all investors. Investors must make their own investment decisions based on their specific investment objectives and financial position and using such independent advice, as they believe necessary. While acting upon any information or analysis mentioned in this report, investors may please note that neither Karvy nor Karvy Stock Broking nor any person connected with any associate companies of Karvy accepts any liability arising from the use of this information and views mentioned in this document. The author, directors and other employees of Karvy and its affiliates may hold long or short positions in the above mentioned companies from time to time. Every employee of Karvy and its associate companies are required to disclose their individual stock holdings and details of trades, if any, that they undertake. The team rendering corporate analysis and investment recommendations are restricted in purchasing/selling of shares or other securities till such a time this recommendation has either been displayed or has been forwarded to clients of Karvy. All employees are further restricted to place orders only through Karvy Stock Broking Ltd. This report is intended for a restricted audience and we are not soliciting any action based on it. Neither the information nor any opinion expressed herein constitutes an offer or an invitation to make an offer, to buy or sell any securities, or any options, futures or other derivatives related to such securities.

Karvy F&O Research is also available on Bloomberg, Reuters, Thomson First Call and CapitalIQ