Report BGSE

1.
Industry Overview
The Indian equity market has widely been regarded as the best performing
amongst the emerging markets of the world. This has also been proved beyond
doubt across the financial world that the regulatory norms in place governing
the Indian Capital Market are one of the best in the world. Recently NSE has
been awarded “Derivative Exchange of the year” by Asia Risk Magazine.
Morgan Stanley research has estimated that trading volumes in the Indian
Markets is
expected to double to $ 3.2 trillion in 2010 from about $1.6 trillion currently
translating into 2530 percent annual growth. Morgan Stanley has also projects
the Indian brokerage business to grow to $3.9 billion by 2015. Hence lots of
international financial services major like Citigroup,Standard Chartered,
France’s Societe Generale, Kuwait based Global investment house,Duetche
Bank, ABN Amro, UBS, Fortis (European banking and insurance major), BNP
Paridas, E*Trade (Fourth largest online broking firm in US) have announced
their foray in the securities and wealth management business in India either
through joint ventured with leading Indian broking houses or plans to venture
in at their own in a big way.
The government of India’s increasing thrust too on use of derivatives for risk
management in the area of Commodity Prices, Foreign Currency and Interest
Rates also call for investigating the risk-return dynamics of investing/trading
with derivatives.
The growth of these markets has led to increasing involvement by institutions,

private equity, and international employee’s pension/insurance/provident funds
like CalPERS and individuals for investment purposes. As a result, there is
demand for academic research considering advantages and disadvantages of
K.L.E Society’s Institute of Management Studies & Research, Hubli

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including managed derivatives in investors' portfolios. The proposed study
imbibes to enrich the body of knowledge in the field of managed stock futures
that will have far-reaching application.
Traded Value in Derivative Segment

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Records achieved in F&O Segment

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2. Company Overview
2.1 Holding Company
The Bangalore Stock Exchange Limited (BgSE) is a self regulatory

organisation located in the garden city of India. The Exchange is managed by
the Governing Board consisting of members nominated by Securities Exchange
Board of India (SEBI), Public Representatives, Elected members and an
Executive Director. The Exchange has been serving the investor community
continuously since its inception in the year 1963.
Over the decades, it has been a journey of progress to the Exchange from the
pith to the pinnacle, from the alcove to the acme and, has emerged as a premier
Exchange in India. The continuous change alone is the changeless law.
As the saying goes, to keep pace with the fast changing technology and
financial system, the Exchange went On-line in 1996. The Exchange has come
a long way since the launch of BEST (Bangalore Electronic Securities
Trading), its On-line trading system on 29th July 1996.
Empowerment of the investors in the market has been the focus of the
Exchange. Information needs of market participants are met through the
Service Centres established by the Exchange at various places in Karnataka. In
addition to this, Investment Education Centre at Bangalore plays a vital role in
enhancing the knowledge base of the participants through several short and
long duration programmes.

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2.1.1 Members
The Exchange has 241 members serving the diverse needs of investors. The
corporate members constitute more than 25% of the total membership of the
Exchange. Members operate within the overall framework of policies and
practices developed over a period of time by the Exchange.
2.1.2 Listing
The securities listed at the Exchange includes a number of innovative and
seasoned corporates from different sectors of industry. As on 31st March 2006,
the number of companies listed on the Exchange are 384 consisting of 186
regional and 198 non regional companies.
2.1.3 Investor Services Centre

With a view to support the investors to resolve their grievances expeditiously,
Exchange has established a Investor Services Committee comprising of Public
Representatives, members and Executive Director, who oversee the functioning
of the Cell and they take appropriate steps for amicable settlement.
To enable the investors at other places to have access to various services,

Centres have been set up at Davangere, Hassan, Hubli, Mysore, Madkeri,
Mangalore Shimoga and Tumkur.

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2.1.4 Investor Information Centre
The Exchange has established a well equipped Library and Investor
Information Centre to cater to varied information needs of investors, corporates
members and others. The Centre has a collection of wide range of books,
periodicals, journals, annual reports, prospectus and research publications
relating to Capital markets. Circulars, notifications issued by authorities are
available. Draft prospectus, offer documents and other related information are
displayed regularly.
In addition, information on over 4000 companies is available in the Corporate

data-bank for investors, corporates and members to help them in investment
decision making process. This data bank consists of details of promoters,
previous public issues, track record, digital form annual reports, financial
performance of companies. Fundamental analysis and Technical analysis, other
general information on industry, sector and economic scenario etc., are
available.
2.1.5 Investment Education Centre

Empowerment of investors through education is the focus of the Exchange. The
Exchange has established an exclusive investment education centre to cater to
the needs of the market participants. This Centre conducts regular and intensive
training sessions, seminars and workshops. In addition to this, the Exchange
continuously holds monthly Investors’ Meet at Bangalore on last sunday of
every month on various current topics and issues

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2.2 BgSE Financials Limited, a company jointly promoted by Bangalore
Stock Exchange Limited and its members was incorporated in the year 1999.
The tech savy company inherits from its parent, Bangalore Stock Exchange, a
strong legacy of nearly four decades of uninterrupted & unmatched expertise
and trust with the investing public in the Capital Market.
The Company has a vision of being one of the leading financial super markets
in India covering a wide array of products & services supported by a large
network of delivery channels spread across the Country as well as being the
trusted name amongst the broking fraternity in the Country through
strategic alliances both at national and international levels.
BgSE Financials Limited has corporate membership with both National Stock
Exchange of India Ltd. (NSE) and Bombay Stock Exchange Ltd. (BSE). The
Company facilitates trading on these premier exchanges through a strong
network of registered traders. The unique feature of BgSE Financials Limited is
that it does not trade on its own account instead provides facilities to its Sub-
brokers to offer quality services to investing public. BgSE Financials Limited
has more than 150 registered Sub-brokers with presence in the state of
Karnataka, Chennai, Delhi, Kolkatta and Mumbai.
The Company’s unique trading system allows the Trader to access multiple
markets viz.NSE (Cash and F&O Segments) and BSE (Cash Segment) through
a single window, thus giving the advantage of instant choice of the Exchange
where he/she would like his/her order to be executed. Using state-of-the-art
technology, trading on these exchanges is made possible even from remote
locations through VSAT and leased lines. The company offers Trading Floor
facilities at its Corporate Office at Bangalore as also at key centres in the State
of Karnataka at Davangere, Hubli, Hassan, Madikeri, Mysore, Mangalore,
Shimoga and Tumkur.

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2.2.1 SERVICES OFFERED BY THE COMPANY :
• DP Services
• Real Time Trading at NSE/BSE
• Online/Internet Trading at NSE/BSE & F&O
• Trading in F&O
• Distribution of Mutual Funds
• GOI Relief Bonds/Capital Gain Bonds/Tax Saving Bond
• Retail Debt Market segment of NSE
• IPO
• Registrar & Share Transfer Agent
2.2.2 Depository Participant (DP) Services

The Company is a registered Depository Participant(DP) of National Securities
Depository Limited(NSDL). The Company offers DP services to varied clients
spread across the Country viz., clearing members, traders and
investors. Currently, the client base is around 75000 and the same is increasing
day-by-day.

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2.2.3 Salient Features of the DP Services are:
Low transaction charges: Charges levied by BgSE Financials Limited are
perhaps the lowest in the industry.
Quicker Settlement: Having trading arrangements with the broking

intermediary which is also a Depository Participant gives an edge in terms of
savings in time and cost.
Greater Convenience: Multiple services all under one roof thereby avoiding
the hassle of dealing with multiple agencies for different services.
Network : An ever increasing network of service points brings BgSE Financial

Limited to close proximity with its clients and investing public.
Technology: State-of-art-technology has been implemented to provide better

and faster service.
Registrar & Share Transfer Agent

The Securities and Exchange Board of India has recently granted the
Certificate of Registration to the Company to take up activities as \" Category I
- Registrar to an Issue and Share Transfer Agent\" . The company is
commencing the above operations very shortly.

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2.3 Board of Directors
Chairman Justice R Jayasimha Babu

Independent Director Mr. N. Nityananda
Independent Director Major General. T.M.John
Independent Director Mr. M.R. Mayya
Director Mr. M.K. Ananda Kumar
Chief Executive Officer Mr.K.N.Ramanatha

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3. Some of the competitors for Sharavu Securities Pvt Ltd are as follows-:
3.1 Indiabulls
Indiabulls is India’s leading Financial Services and Real Estate company
having over 640 branches all over India. Indiabulls serves the financial needs
of more than 4,50,000 customers with its wide range of financial services and
products from securities, derivatives trading, depositary services, research &
advisory services, consumer secured & unsecured credit, loan against shares
and mortgage & housing finance. With around 4000 Relationship Managers,
Indiabulls helps its clients to satisfy their customized financial goals. Indiabulls
through its group companies has entered Indian Real Estate business in 2005. It
is currently evaluating several large-scale projects worth several hundred
million dollars.
3.1.1 Indiabulls Financial Services Ltd is listed on the National Stock

Exchange, Bombay Stock Exchange and Luxembourg Stock Exchange. The
market capitalization of Indiabulls is around USD 2500 million (29th
December 2006). Consolidated net worth of the group is around USD 700
million. Indiabulls and its group companies have attracted USD 500 million of
equity capital in Foreign Direct Investment (FDI) since March 2000. Some of
the large shareholders of Indiabulls are the largest financial institutions of the
world such as Fidelity Funds, Goldman Sachs, Merrill Lynch, Morgan Stanley
and Farallon Capital.
3.2 Way 2 Wealth

Way2Wealth is a premier Investment Consultancy Firm that has been launched
with the aim of making investing simpler, more understandable and profitable
for the investors. Way2Wealth brings a wide range of product offerings from
Fixed Income Securities, Life Insurance and Mutual Funds to Equity and
Derivatives (on the National Stock Exchange) for the convenience and benefit

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of it customers. Way2Wealth has over 40 easily accessible Investment Outlets
spread across 20 major towns and cities in the country.
Mission
Way2Wealth is a premier Investment Consultancy Firm, launched with
the mission “to be the pre-eminent destination for personalized financial
solutions helping individuals create wealth”.
Philosophy
We believe that “our knowledge combined with our investors trust and
involvement will lead to the growth of wealth and make it an exciting
experience”.
Sivan Securities started in 1984, has a long and illustrious track record of being
amongst the premier Financial Intermediaries in the country as well as being an
incubator for IT start-up firms.
The Venture Capital division came to be known as Global Technology

Ventures (GTV has provided venture capital to companies such as Kshema
Technologies, MindTree, Ivega etc.) and the Financial Intermediary Division
was spun off as Way2Wealth in the year 2000. Way2Wealth is promoted by
Sivan Securities and Global Technology Ventures Ltd.
3.3 ASIT C MEHTA
Mission:
To build reputation synonymous with quality, competitiveness, reliability,
fairness and transparency in business dealings and be a responsible corporate
citizen.

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Capital and Currency Market Intermediation:
Asit C. Mehta investment Intermediates Ltd. currently provides most of the services
as follows:
• Equity Market Trade Execution Service:-Membership of the National

Stock Exchange (NSE),The Stock Exchange, Mumbai (BSE) Trade
Execution is done through Private Network which is approved by the
Exchanges and efficiency is offered in trading by display of rates of both
the exchanges simultaneously.
• Derivatives Trading:-Membership of Futures and Options segment of
National Stock Exchange and derivatives segment of The Stock
Exchange Mumbai.
• On Line Trading Facility:-Approval granted by NSE and BSE as per
norms laid down by SEBI for providing such facility,
www.investmentz.com is the website that provides on line trading
facility.
• Depository Services: -A depository participant of Central Depository
Services of India (CDSL).
• IPO Services: -Using the technology backbone the company provides
an online services to bid for various IPOs . It is also possible to actively
participate in IPO market even from centers, which do not have
collection bank facilities.
• Mutual Fund distribution: -The company is an approved distributor of
various Mutual funds. The company has developed the necessary
software to aid the investor in deciding the mutual fund scheme that is
best suited to his investment objectives.
• Portfolio Management Service: -The group company, Nucleus Netsoft
and GIS (India) Ltd. holds a license for providing Portfolio Management

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Services. The company is in the process of finalizing various schemes
for investing through PMS service.
3.4 Motilal Oswal

Motilal Oswal Financial Services is a well-diversified financial services group
having businesses in securities, commodities, investment banking and venture
capital.
With 1160 Business locations and more than 2,00,000 investors in over 360
cities, Motilal Oswal is well suited to handle all your wealth creation and
wealth management needs.
The company has in the last year placed 9.48% with two leading private equity
investors - New Vernon Private Equity Limited and Bessemer Venture Partners
at post money company valuation of Rs. 1345 crore. (Rs. 13.45 billion).
Motilal Oswal Financial Services Ltd., consists of four companies.

Motilal Oswal Investment Advisors Pvt. Ltd. is our Investment Banking arm
with collective experience of over 100 years in investment banking/corporate
banking and advisory services
Motilal Oswal Commodities Broker (P) Ltd. has been providing commodity
trading facilities and related products and services since 2004.
Motilal Oswal Venture Capital Advisors Private Limited has launched the
India Business Excellence Fund (IBEF), a US$100 mn India focused Private
EquityFund..
3.4.1 Motilal Oswal Securities Ltd. (MOSt) is a leading research and

advisory based stock broking house of India, with a dominant position in both
institutional equities and retail wealth management. Our services include

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equities, derivatives, e-broking, portfolio management, mutual funds,
commodities, IPOs and depositary.
Motilal Oswal Securities Ltd. was founded in 1987 as a small sub-broking unit,
with just two people running the show. Focus on customer-first-attitude, ethical
and transparent business practices, respect for professionalism, research-based
value investing and implementation of cutting-edge technology have enabled
us to blossom into an almost two thousand-member team.

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BRANCHES OF BGSE FINANCIALS LIMITED
ARSIKERE
CHITRADURGA
(DP Collection Centre)
DAVANGERE
HASSAN
DHARWAD
HUBLI
MADIKER

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4. Theoretical background of the project :
Rational investors wish to maximize the returns on their funds for a given level
of risk. All the investment decisions possess varying degree of risks. Returns
come in the form of income such as interest or dividends or through growth in
capital values (i.e. capital gains) short terms as well as long term.
been awarded “Derivative Exchange of the year” by Asia Risk Magazine.In
India, NSE has close to 95 percent market share in the total traded volume of
business transacted in India and more than 99.5 percent market share in the
total traded volume in the derivative segment. The derivative volumes has been
more than 80 percent of the combined traded volumes (Equity & Derivative
Segment) and are growing with an accelerated pace.
Trading volumes in the equity segment have grown rapidly with average daily
turnover increasing from Rs.17 crores during 1994-95 to Rs.6,253 crores
during 2005-06., where as in the derivative segment it has grown to Rs. 19,220
from merely Rs. 413 crores in the year 2001-02. As of now, for the month of
March 2007 average daily turnover was Rs. 7998 crores for equity segment and
Rs. 33,036 for derivative segment. The volumes in the derivatives have been
progressively more escalating in the case of index
based derivatives. In the month of December 2006, S&P CNX Nifty has 39
percent and 83 percent share in the traded volumes of futures segment and
options segment respectively (Derivatives Update, December 2006, NSE). The

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aggregate share of Nifty in futures and options has been 58.27 percent for the
month of March 2007.
Markets is expected to double to $ 3.2 trillion in 2010 from about $1.6 trillion
currently translating into 25- 30 percent annual growth. Morgan Stanley has
also projects the Indian brokerage business to grow to $3.9 billion by 2015.
Hence lots of international financial services major like Citigroup, Standard
Chartered, France’s Societe Generale, Kuwait based Global investment house,
Duetche Bank, ABN Amro, UBS, Fortis (European banking and insurance
major), BNP Paridas, E*Trade (Fourth largest online broking firm in US) have
announced their foray in the securities and wealth management business in
India either through joint ventured with leading Indian broking houses or plans
to venture in at their own in a big way.
with derivatives. The growth of these markets has led to increasing
involvement by institutions, private equity, and international employee’s
pension/insurance/provident funds like CalPERS and individuals
for investment purposes. As a result, there is demand for academic research
considering advantages and disadvantages of including managed derivatives in
investors' portfolios. The proposed study imbibes to enrich the body of
knowledge in the field of managed stock futures that will have far-reaching
application.

18
Hence, the researcher has realized that there is definite need to look into the
derivative based investment strategies in general and the index based
derivatives in particular.
The proposed research would focus on the sources of economic efficiency

gains from the use of derivatives. These sources are based on the premise that
derivatives provide much needed liquidity in helping to complete capital
markets, lowering transaction costs, and reducing agency costs. Now the
million dollar question lies in how the characteristics of derivatives may be
capitalized by investors for their enhanced efficiency and utility relative to the
assets that underlie them. The basic idea behind is to find if at all derivatives
can be used as a good investment alternative to suit to the requirement of
different class of investors with varying risk appetite.
The proposed study would go a long way in assisting/helping the large number
of market participants in designing and regulating the challenges and
opportunities posed by the use of derivative products as an integral part of the
investment strategy.

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5. Rationale of the project
Rational investors wish to maximize the returns on their funds for a given level
of risk. All the investment decisions possess varying degree of risks. Returns
come in the form of income such as interest or dividends or through growth in
capital values (i.e. capital gains) short terms as well as long term.
been awarded “Derivative Exchange of the year” by Asia Risk Magazine.
Markets is
expected to double to $ 3.2 trillion in 2010 from about $1.6 trillion currently
translating into 2530 percent annual growth. Morgan Stanley has also projects
the Indian brokerage business to grow to $3.9 billion by 2015. Hence lots of
international financial services major like Citigroup,Standard Chartered,
France’s Societe Generale, Kuwait based Global investment house,Duetche
Bank, ABN Amro, UBS, Fortis (European banking and insurance major), BNP
Paridas, E*Trade (Fourth largest online broking firm in US) have announced
their foray in the securities and wealth management business in India either
through joint ventured with leading Indian broking houses or plans to venture
in at their own in a big way.
with derivatives.

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The growth of these markets has led to increasing involvement by institutions,
private equity, and international employee’s pension/insurance/provident funds
like CalPERS and individuals for investment purposes. As a result, there is
demand for academic research considering advantages and disadvantages of
including managed derivatives in investors' portfolios. The proposed study
imbibes to enrich the body of knowledge in the field of managed stock futures
that will have far-reaching application.
Hence, there is a need for the research to look into the derivative based
investment strategies in general and the index based derivatives in particular &
the company in which the project is undertaken has less volume of trading in
derivatives as compared to equites because the investors think there is more
risk involved entering in derivatives, so if the risk & returns are defined or
valuated then investors can plan their strategies before investing, this in turn
will benefit the company to increase the volume o derivative trading

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6. Utility of the project
 As the number of traders in the derivative segment are very less as

compared to equity segment i.e 20% in the company which is due to
ineffective hedging and insufficient knowledge of rational trading, this
data helps the traders to hedge their risk effectively.
 The turnover can be increased as the traders will increase their
efficiency in hedging their risk in derivative segment.
 The data also helps to hedge the traders risk effectively when there are
volatile sessions in the market.

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7. Objectives of the study
1. Examine the performance of selected companies through option greeks
& suggest various derivative based investment strategies like Long
Future (Naked), Covered call (Long future with short call), Protective
put (Short future with long put), Straddle, Strangle.
2. Examine the risk associated with each of the above investment
strategies.
3. Examine the extent to which the derivatives have been able to hedge the
risk.
4. Examine whether derivatives can be used as an alternative to delivery
based investing.
7.1 Methodology
The daily data on futures and options for the period starting from 10th Dec
2007 to 3rd April 2008 would be used to calculate option greeks.

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8. An Introduction to Futures & Options
8.1 History
In the mid-1840s, Chicago began to emerge as the market center for farmers in
neighboring states. At harvest time, farmers converged on the city to sell their
grain. There was often so much grain that the farmers had to dump a lot of it
into Lake Michigan because there were not enough buyers and no way to store
it. This was unfortunate, because by the time spring rolled around, grain was in
short supply. How did these extreme conditions of having too much grain and
then not enough of it affect grain prices? Let’s take a closer look at the forces
of supply and demand to give us a clue.
8.2 A Tomato Story
As an example, take a look at what happens to the price of tomatoes in the

summer. Farmers have so many tomatoes to sell that they must lower their
prices to get people to buy all of them. (Who can resist a bargain?) When prices
fall because of excess supply, buyers have the upper hand.But what happens in
the winter? People want tomatoes then just as much as in the summer.But as
you know, fewer tomatoes are available. Tomatoes can’t be grown in the cold,
so
most are grown in greenhouses (or these days, shipped from warm places). You
can’t grow nearly as many tomatoes in a greenhouse as you can on a large
farm, and shipping is more difficult than having a supply nearby, so fewer
tomatoes are brought to the market. People who want tomatoes for their salads
and BLTs during the winter find that there is more demand for tomatoes than
supply. When a lot of people want to buy something that’s not readily
available, they end up competing with one another to purchase what they want,
and in this process prices go up.

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People who still want tomatoes in the winter find that they must be willing to
spend more money to buy them. Prices of tomatoes rise to a point where a lot
of buyers drop out — tomato prices have become too expensive for them. The
tomatoes go to the people willing to pay that higher price, and get sold despite
that higher price.
8.3 CME (Chicago Mercantile Exchange)
The success of the CBOT inspired others to create exchanges that would assist
the process of buying and selling futures contracts on other farm products. In
1874, merchants formed the Chicago Produce Exchange, later named the
Chicago Butter and Egg Board, and then in 1919 the CME (Chicago Mercantile
Exchange). The commodities traded at the exchange throughout these years
were butter and eggs. Later, CME began offering trading in hides, onions and
potatoes.During the 1950s, CME also began trading contracts on turkeys and
frozen eggs. And in
1961 CME introduced a new contract that really put the exchange on the map
— frozen pork belly futures. You’ve probably heard of pork bellies dozens of
times, and you’re more familiar with them than you realize. It is from pork
bellies that we get bacon, a necessary part of those BLTs In 1972, CME
introduced financial futures, with the launch of eight currency futures contracts.

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With its reputation for innovation firmly established, CME went on to become
a leading provider of options on futures and cash-settled futures contracts, and
also developed an electronic trading platform to permit trading nearly twenty-
four hours a day.
Today, CME is the largest futures exchange in the U.S. and the second largest
in the world, trading a record 1.05 billion contracts in 2005.
8.4 Futures Contracts

Standardized forward contracts evolved into today’s futures contracts. For
example, a JuneCME Live Cattle futures contract would require the seller to
deliver 40,000 pounds of livecattle of a certain quality to the buyer upon
expiration of the contract.A great advantage of standardized contracts was that
they were easy to trade. As a result,the contracts usually changed hands many
times before their specified delivery dates. Many people who never intended to
make or take delivery of a commodity began to actively engage in buying and
selling futures contracts. Why? They were “speculating” — taking a chance
that as market conditions changed they would be able to buy or sell the
contracts at a profit. The ability to eliminate a “position” on a contract by
buying or selling it before the delivery date — called “offsetting” — is a key
feature of futures trading. Actually, only about 3% of all futures contracts
currently result in physical delivery, because most people clear or eliminate
their positions before the contract expires. Every futures contract has a last day
of trading, and all open positions must be closed out by this Last Trading Day.
For a physical delivery contract like CME Live Cattle, the open positions can
be closed out by making an offsetting futures trade or by making/taking
physical delivery of the cattle. For cash-settled futures contracts, positions can
be closed out by making an offsetting futures trade or by leaving the position
alone and having it closed out by one final mark to market settlement
adjustment.

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9. Some terminologies
9.1 Bull Market
A bull market is a market in which prices are rising. When someone is referred
to as being bullish, that person has an optimistic outlook that prices will be
rising.
9.2 Bear Market

A bear market is one in which prices are falling. Therefore, a bearish view is
pessimistic, and that person would believe that prices are heading downward.
9.3 Going Long

If you were to buy a futures contract to initiate a position, you would be long.
A person who has purchased 10 pork belly futures contracts is long 10 pork
belly contracts.
Someone who is long in the market expects prices to rise. They expect to make
money by later selling the contracts at a higher price than they originally paid
for them.

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9.4 Going Short
A more difficult concept involves the sale of futures contracts before buying
them. Someone who sells a futures contract to initiate a position is said to be
short — for example, short 10 pork belly contracts would mean that a person
initiated a position by selling those 10 contracts. A short seller has entered into
an obligation to deliver a commodity at a future date, at a price agreed upon
today, but with the ability to offset that obligation by buying back the futures
contract.

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9.5 Contract Maturity
Futures contracts have limited lives, known as contract maturities. Contract
maturity is expressed in terms of months, such as December. The contract
maturity designates the time at which deliveries are to be made or taken, unless
the trader has offset the contract by an equal, opposite transaction prior to
maturity.
9.6 Delivery
Only about 3% of all futures contracts actually result in physical delivery or
cash settlement of the commodity. The other 97% are simply offset. That
means that the majority of participants close out their positions prior to the
contract’s delivery date (sellers buy back the futures they sold, and buyers sell
back the futures they bought).
9.7 Hedge
If you “hedge,” you buy or sell a futures contract as a temporary substitute for a
cash market transaction to be made at a later date. Hedging usually involves
holding opposite positions in the cash market and futures market at the same
time. Hedging is a business management tool used to manage price risk.
9.8 Long Hedge

If you put on a “long hedge” you purchase a futures contract in anticipation of
an actual cash market purchase. Processors or exporters typically use long
hedges as protection against an increase in the cash price.
9.9 Short Hedge

To put on a “short hedge” you would sell a futures contract in anticipation of a
later cash market sale. Traders use short hedges to eliminate or lessen the

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possible decline in value of ownership of an approximately equal amount of a
cash financial instrument or physical commodity.
9.10 Speculator
You would be considered a “speculator” if you bought and sold futures
contracts for the sole purpose of making a profit. Speculators attempt to
anticipate price changes. They do not use the futures markets in connection
with the production, processing, marketing or handling of a product, and have
no interest in making or taking delivery.

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9.11 Hedging Is Not Always Perfect
Hedging works best when the hedger has carefully calculated the basis. The
basis is the difference between the specific commodity the hedger buys or sells
in the local cash market and the standardized specifications of the futures
contract. For example, CME cattle futures contract quality specifications are
based on corn-fed steers. But what if a rancher is hedging grass-fed steers and
bulls — a lower quality grade of cattle? The rancher needs to recognize that his
local price for these animals will typically be lower than the cattle futures
market price.
And unlike a feedlot operator raising corn-fed steers near a CME delivery city
and who can choose to make delivery against his short position, this particular
rancher cannot. The rancher must therefore always close out the futures
position and sell the cattle at the local market.

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10. An Introduction to option greeks
10.1 What are greeks ?
There are ways of estimating the risks associated with options, such as the risk
of the stock price moving up or down, implied volatility moving up or down, or
how much money is made or lost as time passes. They are numbers generated
by mathematical formulas. Collectively, they are known as the "greeks.
10.2 Why use Greeks?

For the general investor and retail options trader, knowing the delta of your
options position gives you an indication of how your option’s value will change
with movements in the underlying stock price - all other variables remaining
the same. Knowing your time decay (theta) gives you an indication of how
much time value your option position is losing each day - all other variables
remaining the same. Other measures are explained below.
The professional market uses the Greeks to measure exactly how much they
need to hedge their portfolio. The Greeks also enable the measurement of how
much risk the portfolio is exposed to, and where that risk lies (with movements
in interest rates or volatility, for example)
10.3 Delta
A by-product of the Black Scholes model is the calculation of delta: the degree
to which an option price will move given a change in the underlying stock
price, all else being equal. For example, an option with a delta of 0.5 will move
half a cent for every one cent movement in the underlying stock.
A far out-of-the-money call will have a delta very close to zero; an at-the-
money call a delta of 0.5; a deeply in-the-money call will have a delta close to
1.

32
Call deltas are positive; put deltas are negative, reflecting the fact that the put
option price and the underlying stock price are inversely related. The put delta
equals the call delta minus 1.
The delta is often called the neutral hedge ratio. For example if you have a
portfolio of n shares of a stock then n divided by the delta gives you the
number of calls you would need to write to create a neutral hedge - i.e. a
portfolio which would be worth the same whether the stock price rose by a
small amount or fell by a small amount. In such a "delta neutral" portfolio any
gain in the value of the shares held due to a rise in the share price should be
exactly offset by a loss on the value of the calls written, and vice versa.
Formula:
10.4 Gamma
Gamma is a measure of the change in delta for a change in the underlying stock
price. If you are hedging a portfolio using the delta-hedge technique described
above, then you will probably want to keep gamma as small as possible. The
smaller gamma is, the less often you will have to adjust the hedge to maintain a
delta neutral position. If gamma is too large a small change in stock price could
break your hedge. Adjusting gamma, however, can be tricky and is generally
done using options - unlike delta, it cannot be done by buying or selling the
underlying asset, as the gamma of the underlying asset is, by definition, always
zero so more or less of it will not affect the gamma of the total portfolio.

33
Formula:
10.5 Vega
Vega (sometimes known as kappa) is the change in option price given a one
percentage point change in volatility. Vega is used for hedging volatility risk.
Long calls and long puts always have negative theta. Long calls and long puts
both always have positive vega. Short calls and short puts both always have
negative vega. Stock has zero vega – it's value is not affected by volatility.
Positive vega means that the value of an option position increases when
volatility increases, and decreases when volatility decreases. Negative vega
means that the value of an option position decreases when volatility increases,
and increases when volatility decreases.
10.6 Theta
Theta is the change in option price given a one day decrease in time to
expiration. It is a measure of time decay. Theta is generally regarded as a
descriptive statistic, used to gain an idea of how time decay is affecting your
portfolio, rather than as the basis of a hedge. Hedging a portfolio against time
decay, the effects of which are completely predictable, would be pointless.
Short calls and short puts always have positive theta. Stock has zero theta – its
value is not eroded by time. All other things being equal, an option with more
days to expiration will have more extrinsic value than an option with fewer
days to expiration

34
10.7 Rho
Rho is the change in option price given a one percentage point change in the
risk-free interest rate. The more expensive it is to hold a stock position, the
more expensive the call option. An increase in interest rates increases the value
of calls and decreases the value of puts. A decrease in interest rates decreases
the value of calls and increases the value of puts.
10.1.1 In The Money Options

A call option is considered In The Money ( ITM ) when the call option's strike
price is lower than the prevailing market price of the underlying stock, thus
allowing its owner to buy the underlying stock at lower than the prevailing
market price by exercising the call option.
Example : If GOOG is trading at $300, it's $200 strike call options are In The
Money ( ITM ) as it allows one to buy GOOG at $200 when it is trading at
$300 now. The $200 strike call options therefore has an intrinsic value of $100.
A put option is considered In The Money ( ITM ) when the put option's strike
price is higher than the prevailing market price of the underlying stock, thus
allowing its owner to sell the underlying stock at higher than the prevailing
market price by exercising the put option.
Example : If GOOG is trading at $300, it's $400 strike put options are In The
Money ( ITM ) as it allows one to sell GOOG at $400 when it is trading at
$300 now. The $400 strike call options therefore has an intrinsic value of $100.

35
10.1.2 At The Money Options
Stock Options whose strike price is exactly at or very near the prevailing price
of the underlying stock. At The Money Options ( ATM ) is one of the three
option money ness states that all option traders has to be familiar with before
even thinking of actual options trading.
For example, if QQQQ is trading at $50, it's $50 strike price call and put
options are At The Money. Usually, this situation is very rare as stock prices
changes every single minute. Industry experts usually refer to strike prices
within a few cents of the prevailing stock price as At The Money too. At The
Money is also the only status where both call option and put option occurs
together.
10.1.3 Out of The Money Options

A call option is considered Out Of The Money ( OTM ) when the call option's
strike price is higher than the prevailing market price of the underlying stock. It
confers you the right to buy the underlying stock at a HIGHER price than the
prevailing stock price and hence it has no intrinsic value. Such a call option
will gain in value very quickly should the underlying stock rally above it's
strike price. As it has completely no intrinsic value and requires the underlying
stock to gain in price significantly in order to realise a profit, it is also the
cheapest to buy in terms of absolute dollars.
Example : If GOOG is trading at $300, it's $400 strike call options are Out Of
The Money ( OTM ) as it allows one to buy GOOG at $400 when it is trading
at only $300 now.
A put option is considered Out Of The Money ( OTM ) when the put option's
strike price is lower than the prevailing market price of the underlying stock.
This allows you to sell the undelying stock for lower than the prevailing market
price which will not make any sense and therefore contains no intrinsic value.

36
Example : If GOOG is trading at $300, it's $200 strike put options are Out Of
The Money ( OTM ) as it allows one to sell GOOG at $200 when it is trading at
$300 now.
10.2 Trading Strategies: Meaning
10.2.1 Covered Call
An options strategy whereby an investor holds a long position in an asset and
writes (sells) call options on that same asset in an attempt to generate increased
income from the asset. This is often employed when an investor has a short-
term neutral view on the asset and for this reason hold the asset long and
simultaneously have a short position via the option to generate income from the
option premium.
This is also known as a "buy-write".

For example, let's say that you own shares of the TSJ Sports Conglomerate and
like its long-term prospects as well as its share price but feel in the shorter term
the stock will likely trade relatively flat, perhaps within a few dollars of its
current price of, say, $25. If you sell a call option on TSJ for $26.00, you earn
the premium from the option sale but cap your upside.
10.2.2 Naked Call Writing

In options terminology, "naked" refers to strategies in which the underlying
stock is not owned and options are written against this phantom stock position.
(In the articles Come One, Come All -Covered Calls and Married Puts: A
Protective Relationship, we deal exclusively with options that have underlying
stock positions.) The naked strategy is a more aggressive, having a lot more
risk, but it can be used to generate income as part of a diversified portfolio. If
not used properly, however, a naked call position can have disastrous
consequences since a stock can theoretically rise to infinity

37
Let us consider the following example: ABC's stock trades for $100 and the
$105 call that is one month to expiry trades at $2. You, not owning any ABC
stock, can sell (write) a naked call at $2 and collect $200. By doing so, you are
speculating that ABC stock will be below $107 ($105 + $2 premium) at expiry
(if it is below $107, the person to whom you sold the naked call will not
exercise it). Consider the payoff diagram
10.2.3 Protective Put
The investor employing the protective put strategy owns shares of underlying
stock from a previous purchase, and generally has unrealized profits accrued
from an increase in value of those shares. He might have concerns about
unknown, downside market risks in the near term and wants some protection
for the gains in share value. Purchasing puts while holding shares of underlying
stock is a directional strategy, but a bullish one.

38
10.2.4 Straddles
An options strategy with which the investor holds a position in both a call and
put with the same strike price and expiration date.
Straddles are a good strategy to pursue if an investor believes that a stock's

price will move significantly, but is unsure as to which direction. The stock
price must move significantly if the investor is to make a profit. As shown in
the diagram above, should only a small movement in price occur in either
direction, the investor will experience a loss. As a result, a straddle is extremely
risky to perform. Additionally, on stocks that are expected to jump, the market

39
tends to price options at a higher premium, which ultimately reduces the
expected payoff should the stock move significantly
10.2.5 Strangles
An options strategy where the investor holds a position in both a call and put
with different strike prices but with the same maturity and underlying asset.
This option strategy is profitable only if there are large movements in the price
of the underlying asset.
This is a good strategy if you think there will be a large price movement in the
near future but are unsure of which way that price movement will be.
The strategy involves buying an out-of-the-money call and an out-of-the-
money put option. A strangle is generally less expensive than a straddle as the
contracts are purchased out of the money..
For example, imagine a stock currently trading at $50 a share. To employ the
strangle option strategy a trader enters into two option positions, one call and
one put. Say the call is for $55 and costs $300 ($3.00 per option x 100 shares)
and the put is for $45 and costs $285 ($2.85 per option x 100 shares). If the
price of the stock stays between $45 and $55 over the life of the option the loss
to the trader will be $585 (total cost of the two option contracts). The trader
will make money if the price of the stock starts to move outside of the range.
Say that the price of the stock ends up at $35. The call option will expire
worthless and the loss will be $300 to the trader. The put option however has
gained considerable value, it is worth $715 ($1,000 less the initial option value
of $285). So the total gain the trader has made is $415.

40
11. Company: ABB Ltd
Date N(d1) N(d2) sigma Gamma

0.279 0.399087 0.2 0.000279
10-Dec-07 0.335 0.368978 0.0684 0.00065
11-Dec-07 0.080 -0.14598 0.7863 9.1E-05
12-Dec-07 0.226 0.240338 0.1604 0.000389
13-Dec-07 0.411 0.257839 0.8436 3.73E-05
14-Dec-07 0.499 0.497804 0.3602 2.38E-06
17-Dec-07 0.237 -0.49953 4.1041 1.95E-05
18-Dec-07 -0.412 -0.42084 0.2177 0.000198
19-Dec-07 0.026 -0.4953 2.8113 4.14E-05
20-Dec-07 0.007 -0.4967 2.8726 4.6E-05
24-Dec-07 -0.500 -0.5 0.0756 2.79E-33
26-Dec-07 -0.144 -0.49823 2.5983 0.000126
27-Dec-07 -0.473 -0.49412 0.6524 8.34E-05
28-Dec-07 0.103 0.151819 0.1751 0.000327
31-Dec-07 0.041 -0.39897 1.6707 3.62E-05
1-Jan-08 -0.315 -0.25107 0.0694 0.000587
2-Jan-08 -0.500 -0.5 0.0099 2.39E-14
3-Jan-08 -0.019 -0.19166 0.7311 8.68E-05
4-Jan-08 -0.026 -0.16413 0.6299 0.000103
7-Jan-08 -0.063 -0.20572 0.6392 0.000106
8-Jan-08 -0.087 -0.02573 0.0967 0.000714
9-Jan-08 -0.048 -0.06218 0.2803 0.000257
10-Jan-08 0.073 0.12091 0.1171 0.000626
11-Jan-08 0.080 -0.47191 2.3447 3.27E-05
14-Jan-08 -0.235 -0.22562 0.1887 0.000378
15-Jan-08 0.014 -0.41335 1.6057 5.65E-05
16-Jan-08 0.036 -0.49008 2.6235 3.71E-05
17-Jan-08 -0.300 -0.40726 0.6789 0.000108
18-Jan-08 -0.107 -0.46377 1.7125 6.26E-05
21-Jan-08 0.154 -0.5 6.8997 1.86E-05
22-Jan-08 -0.008 -0.5 5.0167 3.3E-05
23-Jan-08 -0.046 -0.4998 3.5763 4.95E-05
24-Jan-08 0.048 -0.5 6.6339 2.95E-05
25-Jan-08 0.094 -0.5 7.559 2.73E-05
28-Jan-08 -0.240 -0.49999 3.6253 6.49E-05
29-Jan-08 -0.304 -0.46606 1.0447 0.000247
30-Jan-08 0.249 -0.49966 4.1185 0.000107
31-Jan-08 -0.338 -0.49973 2.5242 0.000144
1-Feb-08 #REF! #REF! 1.902 #REF!
4-Feb-08 0.337 -0.5 6.6027 1.05E-05
5-Feb-08 0.287 -0.49997 5.0265 1.52E-05
6-Feb-08 0.500 0.5 0.0587 3.76E-43
7-Feb-08 0.500 0.5 0.0587 7.44E-44
8-Feb-08 0.452 0.414366 0.5205 5.16E-05
11-Feb-08 0.237 -0.31435 1.7441 5.35E-05
12-Feb-08 0.499 0.498844 0.2615 3.75E-06

41
13-Feb-08 0.275 -0.19421 1.4661 6.21E-05
14-Feb-08 0.272 -0.28591 1.7331 5.31E-05
15-Feb-08 0.250 -0.4968 3.591 2.65E-05
18-Feb-08 0.500 0.5 0.0517 3.4E-116
19-Feb-08 0.225 -0.476 2.7334 4.36E-05
20-Feb-08 0.192 -0.49923 3.8165 3.73E-05
21-Feb-08 0.165 -0.49989 4.2522 4.03E-05
22-Feb-08 0.142 -0.40481 1.802 0.000112
25-Feb-08 0.300 0.051489 0.802 0.00027
26-Feb-08 0.500 0.5 0.1416 3.07E-09
27-Feb-08 0.500 0.496085 0.9386 1.04E-06
28-Feb-08 -0.500 -0.5 0.9299 1.15E-07
29-Feb-08 0.098 -0.49899 3.6085 2.85E-05
3-Mar-08 0.170 -0.49811 3.5921 3.05E-05
4-Mar-08 -0.192 -0.42502 1.1896 9.61E-05
5-Mar-08 -0.195 -0.43603 1.2585 9.25E-05
7-Mar-08 0.097 -0.49992 4.2669 3.26E-05
10-Mar-08 0.089 -0.49994 4.2836 3.54E-05
11-Mar-08 -0.500 -0.5 0.1079 1.86E-24
12-Mar-08 -0.041 -0.49441 2.6364 5.86E-05
13-Mar-08 -0.100 -0.49906 3.0509 5.12E-05
14-Mar-08 -0.076 -0.49473 2.5546 6.48E-05
17-Mar-08 0.161 -0.5 8.4737 2.22E-05
18-Mar-08 -0.135 -0.49934 3.025 7.13E-05
19-Mar-08 -0.170 -0.49988 3.3757 6.13E-05
24-Mar-08 -0.500 -0.5 0.0543 0
25-Mar-08 -0.165 -0.5 4.7832 8.04E-05
26-Mar-08 -0.500 -0.5 0.7601 9.24E-10
27-Mar-08 0.056 -0.00968 0.2186 0.002531
28-Mar-08 0.174 -0.44688 2.3394 4.05E-05
31-Mar-08 0.007 -0.36541 1.3791 7.99E-05
1-Apr-08 0.044 -0.40591 1.678 6.65E-05
2-Apr-08 -0.500 -0.5 0.0083 9.2E-105
3-Apr-08 0.184 -0.49999 5.1131 2.12E-05

42
11.2 2-month Options

0.279131 0.399087 0.2 0.000279
10-Dec-07 0.307485 0.058083 1.1 0.00041
11-Dec-07 0.492314 -0.5 12.65 2.76E-06
12-Dec-07 0.279747 -0.42765 2.6 0.00019
13-Dec-07 0.494816 -0.5 13.7 1.85E-06
14-Dec-07 0.380294 -0.49999 5.8 5.92E-05
17-Dec-07 0.5 -0.5 65.85 9.58E-35
18-Dec-07 0.27789 -0.48738 3.35 0.000166
19-Dec-07 0.5 -0.5 43.35 1.56E-17
20-Dec-07 0.5 -0.5 43.05 4.61E-17
24-Dec-07 0.218769 -0.07854 1.1 0.000652
26-Dec-07 0.5 -0.5 37.85 4.42E-13
27-Dec-07 0.440719 -0.5 9.75 2.63E-05
28-Dec-07 0.117484 -0.47703 2.6 0.000323
31-Dec-07 0.499855 -0.5 24.85 5.12E-08
1-Jan-08 0.11245 -0.14141 1.05 0.0006
2-Jan-08 -0.02684 0.071935 0.15 0.004404
3-Jan-08 0.485809 -0.5 11.05 5.51E-06
4-Jan-08 0.468698 -0.5 9.45 1.26E-05
7-Jan-08 0.466246 -0.5 9.65 1.37E-05
8-Jan-08 0.122716 -0.27744 1.45 0.000468
9-Jan-08 0.284784 -0.49882 4.2 0.000126
10-Jan-08 0.15545 -0.33733 1.75 0.000385
11-Jan-08 0.5 -0.5 35 3.83E-14
14-Jan-08 0.192625 -0.47099 2.75 0.000249
15-Jan-08 0.499977 -0.5 23.45 8.59E-09
16-Jan-08 0.5 -0.5 37.7 1.8E-14
17-Jan-08 0.445839 -0.5 9.5 2.45E-05
18-Jan-08 0.499966 -0.5 23.8 1.32E-08
21-Jan-08 0.5 -0.5 94.25 6.95E-56
22-Jan-08 0.5 -0.5 63.8 7.18E-28
23-Jan-08 0.5 -0.5 43.2 2.58E-15
24-Jan-08 0.5 -0.5 83 2.12E-41
25-Jan-08 0.5 -0.5 88.3 4.71E-45
28-Jan-08 0.5 -0.5 45.55 7.52E-15
29-Jan-08 0.493163 -0.5 12.65 3.19E-06
30-Jan-08 0.5 -0.5 49.35 1.03E-25
31-Jan-08 0.5 -0.5 29 4.2E-12
1-Feb-08 0.499981 -0.5 21.3 8.6E-09
4-Feb-08 0.5 -0.5 75.35 6.27E-48
5-Feb-08 0.5 -0.5 61.15 6.87E-33
6-Feb-08 0.356893 0.251463 0.75 0.00065
7-Feb-08 0.356347 0.249492 0.75 0.000659
8-Feb-08 0.401051 -0.5 6.65 5.74E-05
11-Feb-08 0.499946 -0.5 22.4 2.27E-08
12-Feb-08 0.277575 -0.48598 3.3 0.00021

43
13-Feb-08 0.499176 -0.5 18.55 3.53E-07
14-Feb-08 0.499899 -0.5 22.25 4.14E-08
15-Feb-08 0.5 -0.5 46.9 2.94E-18
18-Feb-08 0.398428 0.31238 0.7 0.000596
19-Feb-08 0.5 -0.5 37 1.77E-12
20-Feb-08 0.5 -0.5 50.25 3.19E-18
21-Feb-08 0.5 -0.5 53.85 1.11E-19
22-Feb-08 0.499429 -0.5 21.85 2.61E-07
25-Feb-08 0.41776 -0.5 9.55 4.7E-05
26-Feb-08 0.26316 -0.26007 1.7 0.000547
27-Feb-08 0.445886 -0.5 11.25 2.97E-05
28-Feb-08 0.424166 -0.5 11.25 3.97E-05
29-Feb-08 0.5 -0.5 43.25 9.82E-21
3-Mar-08 0.5 -0.5 41.5 1.16E-18
4-Mar-08 0.492865 -0.5 13.25 3.64E-06
5-Mar-08 0.49439 -0.5 13.85 2.8E-06
7-Mar-08 0.5 -0.5 47.55 1.72E-21
10-Mar-08 0.5 -0.5 45.7 2.54E-19
11-Mar-08 -0.06653 -0.34622 1.2 0.00085
12-Mar-08 0.5 -0.5 29.3 1.2E-10
13-Mar-08 0.5 -0.5 34.8 9.5E-13
14-Mar-08 0.499999 -0.5 28.25 5.43E-10
17-Mar-08 0.5 -0.5 96.1 9.36E-58
18-Mar-08 0.5 -0.5 31.4 1.56E-10
19-Mar-08 0.5 -0.5 36.1 3.85E-12
24-Mar-08 -0.34485 -0.40711 0.6 0.001234
25-Mar-08 0.5 -0.5 52.85 8.44E-18
26-Mar-08 0.381509 -0.5 8.8 6.85E-05
27-Mar-08 0.171613 -0.46627 2.55 0.000438
28-Mar-08 0.499905 -0.5 27.35 4.26E-08
31-Mar-08 0.484208 -0.5 16.5 7.93E-06

44
11.3 3-month

0.279 0.399087 0.2 0.000279
10-Dec-07 0.271 0.137151 0.8584 0.000366
11-Dec-07 0.301 0.19964 0.7863 2.93E-05
12-Dec-07 0.499 0.499567 0.1604 2.08E-06
13-Dec-07 0.270 0.138378 0.8436 3E-05
14-Dec-07 0.408 0.423097 0.3602 3.88E-05
17-Dec-07 0.342 -0.49602 4.1041 5.32E-06
18-Dec-07 0.398 0.433005 0.2177 7.74E-05
19-Dec-07 0.260 -0.45201 2.8113 1.09E-05
20-Dec-07 0.279 -0.4523 2.8726 1.08E-05
24-Dec-07 0.500 0.5 0.0756 9.89E-10
26-Dec-07 0.263 -0.42846 2.5983 1.3E-05
27-Dec-07 0.285 0.209834 0.6524 4.86E-05
28-Dec-07 0.416 0.446678 0.1751 9.71E-05
31-Dec-07 0.230 -0.24388 1.6707 2.19E-05
1-Jan-08 0.260 0.130247 0.8594 0.000404
2-Jan-08 0.500 0.5 0.0099 6.38E-56
3-Jan-08 0.334 0.264251 0.7311 3.13E-05
4-Jan-08 0.363 0.326339 0.6299 3.23E-05
7-Jan-08 0.353 0.310572 0.6392 3.39E-05
8-Jan-08 0.500 0.5 0.0967 8.33E-12
9-Jan-08 0.481 0.488197 0.2803 1.58E-05
10-Jan-08 0.500 0.499967 0.1171 4.32E-07
11-Jan-08 0.256 -0.38413 2.3447 1.35E-05
14-Jan-08 0.476 0.487388 0.1887 3.13E-05
15-Jan-08 0.212 -0.22632 1.6057 2.28E-05
16-Jan-08 0.273 -0.42434 2.6235 1.3E-05
17-Jan-08 0.285 0.20864 0.6789 5.05E-05
18-Jan-08 0.192 -0.28083 1.7125 2.49E-05
21-Jan-08 0.429 -0.5 6.8997 2.68E-06
22-Jan-08 0.362 -0.49977 5.0167 6.77E-06
23-Jan-08 0.299 -0.48985 3.5763 1.24E-05
24-Jan-08 0.415 -0.5 6.6339 3.85E-06
25-Jan-08 0.441 -0.5 7.559 2.57E-06
28-Jan-08 0.285 -0.49255 3.6253 1.32E-05
29-Jan-08 0.158 -0.09477 1.0447 6.08E-05
30-Jan-08 0.293 -0.49818 4.1185 1.28E-05
31-Jan-08 0.286 -0.40987 2.5242 2.29E-05
1-Feb-08 0.282 -0.24041 1.902 2.54E-05
4-Feb-08 0.449 -0.5 6.6027 2.44E-06
5-Feb-08 0.403 -0.49944 5.0265 4.71E-06
6-Feb-08 0.500 0.5 0.0587 4.86E-15
7-Feb-08 0.500 0.5 0.0587 7.62E-15
8-Feb-08 0.324 0.306411 0.5205 6.65E-05
11-Feb-08 0.228 -0.25526 1.7441 2.63E-05
12-Feb-08 0.437 0.456364 0.2615 6.7E-05

45
13-Feb-08 0.227 -0.16312 1.4661 3.16E-05
14-Feb-08 0.238 -0.24458 1.7331 2.56E-05
15-Feb-08 0.311 -0.48857 3.591 9.81E-06
18-Feb-08 0.500 0.5 0.0517 2.47E-09
19-Feb-08 0.240 -0.45242 2.7334 1.58E-05
20-Feb-08 0.293 -0.49506 3.8165 1.07E-05
21-Feb-08 0.309 -0.49848 4.2522 1E-05
22-Feb-08 0.125 -0.35798 1.802 3.54E-05
25-Feb-08 0.031 -0.12605 0.802 8.63E-05
-
26-Feb-08 0.193 -0.09732 0.1416 0.000433
27-Feb-08 0.189 -0.01991 0.9386 6.57E-05
28-Feb-08 0.011 -0.19544 0.9299 7.55E-05
29-Feb-08 0.311 -0.49029 3.6085 1.39E-05
3-Mar-08 0.350 -0.48062 3.5921 1.03E-05
4-Mar-08 0.262 0.003812 1.1896 4.37E-05
5-Mar-08 0.279 -0.00251 1.2585 3.98E-05
7-Mar-08 0.364 -0.49643 4.2669 9E-06
10-Mar-08 0.371 -0.49635 4.2836 8.83E-06
11-Mar-08 0.500 0.5 0.1079 3.22E-10
12-Mar-08 0.301 -0.40795 2.6364 1.81E-05
13-Mar-08 0.305 -0.45829 3.0509 1.56E-05
14-Mar-08 0.263 -0.41664 2.5546 2.11E-05
17-Mar-08 0.473 -0.5 8.4737 1.41E-06
18-Mar-08 0.265 -0.46836 3.025 2.06E-05
19-Mar-08 0.311 -0.48 3.3757 1.54E-05
24-Mar-08 0.500 0.499996 0.0543 2.93E-07
25-Mar-08 0.373 -0.49936 4.7832 8.08E-06
26-Mar-08 0.353 0.259983 0.7601 5.36E-05
27-Mar-08 0.499 0.499609 0.2186 2.17E-06
28-Mar-08 0.239 -0.40098 2.3394 2.41E-05
31-Mar-08 0.204 -0.17042 1.3791 4.41E-05
1-Apr-08 0.255 -0.22209 1.678 3.32E-05
2-Apr-08 0.500 0.5 0.0083 6.09E-28
3-Apr-08 5.1131 #DIV/0!

46
1-month Call
N(d1)
0.6
0.4
0.2
0 N(d1)
0 5 10 15 20 25 30 35 40
-0.2
-0.4
-0.6
1 month put
Time to Expire
40
35
30
25
20 Time to Expire
15
10
5
0
-0.6 -0.4 -0.2 0 0.2 0.4 0.6

47
2-month Call
0.6
0.5
0.4
0.3
0.2
0.1 Series1
0
-0.1 0 10 20 30 40 50 60 70
-0.2
-0.3
-0.4
2-Month Put
70
60
50
40
Series1
30
20
10
0
-0.6 -0.5 -0.4 -0.3 -0.2 -0.1 0 0.1 0.2 0.3 0.4

48
3-Month Call
0.6
0.5
0.4
0.3
0.2
Series1
0.1
0
-0.1 0 20 40 60 80 100
-0.2
-0.3
3-Month Put
0.6
0.4
0.2
0 Series1
0 20 40 60 80 100
-0.2
-0.4
-0.6

49
11.2 Analysis :
11.2.1 Delta for Call Options
1-Month
For this Company, Call options for 1 month are very volatile and they react
very heavily with a small change in the spot price, in all there are 31 options
which are highly insignificant to exercise & the other remaining options are in
between 0.2 & 0.6 which signifies ATM options i.e it will not cause any losses
to the traders if they exercise the option.
2-Months
The analysis for this month option is completely opposite from the previous
one because there are hardly 3 options which are of deep OTM, so this is a very
safe bet for the traders because majority of the options are in the range of –0.5,
the hedging is effective in case of purchasing 2 month options of ABB
Company
3-Months
Only one option is deep OTM which is negative, so in this company as the
option’s time to expiry goes on increasing the effectiveness of hedging also
increases. But when we consider theta for analysis, the value of the option goes
on diminishing, but nevertheless the options of this company are turning into
pure OTM options. The hedging will be effective for these options which is
risk free.
11.2.2 Put Options for Delta
1 Month
Around 17 options are deep OTM which are highly insignificant to exercise,
the same has been reflected from the 1 month call options, so the hedging is not

50
at all effective in case of this scrip, this is a very riskier option specially 1
month options, other options are lying between 0.0 to 0.6, in that also most of
them are OTM options.
2 Months
As said in the earlier analysis, as the time frame of the option is increasing, the
scrip is giving out a real significant option to exercise, it shows a better
position as compared to 1 month options, so exercising this will not harm any
trader but yes it does not benefit any trader but very safe on hedging.
3 Months
The case has completely turned down in 3 months contract because most of the
options are highly insignificant to exercise and a trader will suffer losses by
exercising this option, hedging through this scrip is not at all effective.
11.2.3 Interpretation for Gamma

There is a positive correlation between delta & gamma. It also tells that a mere
increase in gamma shows an increase in the value for an increase in the price of
the option, the pace has went on decreasing subsequently in all the terms of the
contract. So as previously said there exists a positive correlation between both.

51
11.2.4 Strategies for ABB
 As the options in 1 month are very riskier & very volatile, so the best
type of strategy suggested for this one is Naked Call because
exercising this option would be a heavy loss trade.
 Straddles can also be one of the good strategy for this type of option
because of high volatility in the call as well as in the put options &
strangles in case of 3 month options because of deep OTM Options.
 According to the research done, straddles can be used as an effective
hedging tool for 1 & 2 month contracts because the opton is getting
non-riskier as it is approaching the expiry date & this is the best
recommended strategy, but not in the case of 3 months because of
deep OTM options in this scrip.

52
12. Company ACC
12.1 1-Month

0.279 0.234946 0.2 0.000279
10-Dec-07 -0.374 -0.39475 0.5 0.001805
11-Dec-07 0.365 -0.38273 10.95 8.8E-05
12-Dec-07 -0.110 -0.21649 1.45 0.001216
13-Dec-07 0.314 -0.34975 9.85 0.00013
14-Dec-07 0.500 -0.4999 39.25 5.33E-08
17-Dec-07 0.498 -0.49823 34.95 1.06E-06
18-Dec-07 -0.219 -0.28591 1.35 0.001491
19-Dec-07 0.495 -0.49662 35.9 2.44E-06
20-Dec-07 0.483 -0.48614 31.15 9.93E-06
24-Dec-07 -0.449 -0.46553 2 0.000575
26-Dec-07 -0.153 -0.22241 3.75 0.00187
27-Dec-07 -0.274 -0.29971 1.7 0.003367
28-Dec-07 0.344 -0.35317 6.75 0.000115
31-Dec-07 0.480 -0.48173 14.25 1.12E-05
1-Jan-08 0.165 -0.22304 3.55 0.000348
2-Jan-08 0.264 -0.2806 5.3 0.000201
3-Jan-08 0.486 -0.48808 16.1 7.91E-06
4-Jan-08 0.321 -0.35667 7.3 0.000132
7-Jan-08 0.117 -0.10496 2.2 0.000675
8-Jan-08 0.481 -0.48122 16.55 1.13E-05
9-Jan-08 0.472 -0.46701 15.3 1.74E-05
10-Jan-08 0.500 -0.49992 31.15 5.84E-08
11-Jan-08 0.500 -0.5 40.15 8.54E-10
14-Jan-08 0.490 -0.49291 22.15 6.34E-06
15-Jan-08 0.201 -0.32838 7.05 0.00027
16-Jan-08 0.369 -0.41357 12.25 0.0001
17-Jan-08 -0.119 -0.29754 2.7 0.000838
18-Jan-08 0.143 -0.23707 5.3 0.000431
21-Jan-08 0.500 -0.5 128.35 1E-29
22-Jan-08 0.404 -0.43516 17.95 8.42E-05
23-Jan-08 0.489 -0.49159 31.55 8.46E-06
24-Jan-08 -0.112 -0.27951 3.5 0.001048
25-Jan-08 0.461 -0.47046 28.5 2.93E-05
28-Jan-08 0.215 -0.30506 15.75 0.000298
29-Jan-08 -0.142 -0.27436 5.25 0.001211
30-Jan-08 0.278 0.172427 6.1 0.001166
31-Jan-08 0.318 -0.26313 31 0.000212
1-Feb-08 0.457 -0.44512 12.2 3.63E-05
4-Feb-08 0.437 -0.41686 11.35 5.57E-05
5-Feb-08 0.273 0.153284 1.45 0.0011
6-Feb-08 0.238 -0.10758 3.8 0.000467
7-Feb-08 0.342 -0.29131 7.75 0.000172
8-Feb-08 0.327 -0.26542 7.3 0.000197
11-Feb-08 0.500 -0.5 42 1.92E-09

53
12-Feb-08 0.481 -0.47758 19.45 1.61E-05
13-Feb-08 0.484 -0.48139 20.9 1.25E-05
14-Feb-08 0.421 -0.40155 13.8 7.23E-05
15-Feb-08 0.258 -0.15023 5.75 0.000379
18-Feb-08 0.229 0.090875 2.3 0.001149
19-Feb-08 0.496 -0.49495 33.25 2.9E-06
20-Feb-08 0.456 -0.44597 22.4 3.64E-05
21-Feb-08 0.348 -0.29628 13.4 0.000162
22-Feb-08 0.237 -0.09182 6.75 0.000487
25-Feb-08 0.480 -0.47458 44.3 1.44E-05
26-Feb-08 0.265 -0.08915 12.8 0.00039
27-Feb-08 0.003 -0.25929 13.6 0.000685
28-Feb-08 0.249 0.079492 9 0.000836
29-Feb-08 0.453 -0.46252 12.7 3.58E-05
3-Mar-08 0.292 -0.34899 7.2 0.000197
4-Mar-08 0.500 -0.5 42.05 4.62E-11
5-Mar-08 0.236 -0.25996 5.45 0.000329
7-Mar-08 0.260 -0.28557 6.4 0.000282
10-Mar-08 0.500 -0.49982 32.7 1.69E-07
11-Mar-08 0.500 -0.5 45.7 5.8E-10
12-Mar-08 0.194 -0.25813 5.95 0.00036
13-Mar-08 0.497 -0.49736 28.2 2.21E-06
14-Mar-08 0.467 -0.47153 19.8 2.49E-05
17-Mar-08 0.490 -0.49171 28.5 7.42E-06
18-Mar-08 0.267 -0.33092 10.75 0.000238
19-Mar-08 0.392 -0.41444 17.6 9.17E-05
24-Mar-08 0.381 -0.40351 27.4 9.92E-05
25-Mar-08 0.129 -0.23073 12.75 0.00049
26-Mar-08 -0.500 -0.5 0.05 0
27-Mar-08 -0.057 -0.17023 5.7 0.001608
28-Mar-08 0.482 -0.48172 15.4 1.26E-05
31-Mar-08 0.450 -0.43793 12.4 3.94E-05
1-Apr-08 0.327 0.218103 1.45 0.000853
2-Apr-08 0.463 -0.45273 14.1 2.77E-05
3-Apr-08 0.432 -0.41333 11.9 5.55E-05

54
12.2 2-Month
Date N(d1) N(d2) sigma 0.000279

0.279 0.399087 0.2 0.001062
10-Dec-07 0.368 0.340479 0.5 1.01E-05
11-Dec-07 0.482 -0.5 10.95 0.000565
12-Dec-07 0.238 -0.17124 1.45 1.88E-05
13-Dec-07 0.468 -0.5 9.85 2.29E-16
14-Dec-07 0.500 -0.5 39.25 1.86E-13
17-Dec-07 0.500 -0.5 34.95 0.000661
18-Dec-07 0.230 -0.15189 1.35 1.7E-13
19-Dec-07 0.500 -0.5 35.9 3.11E-11
20-Dec-07 0.500 -0.5 31.15 0.000562
24-Dec-07 0.167 -0.39353 2 0.000253
26-Dec-07 0.275 -0.49634 3.75 0.000644
27-Dec-07 0.213 -0.29595 1.7 0.000104
28-Dec-07 0.366 -0.5 6.75 1.03E-05
31-Dec-07 0.482 -0.5 14.25 0.000192
1-Jan-08 0.299 -0.4896 3.55 0.000106
2-Jan-08 0.355 -0.49994 5.3 3.67E-07
3-Jan-08 0.499 -0.5 16.1 4.84E-05
4-Jan-08 0.427 -0.5 7.3 0.000425
7-Jan-08 0.189 -0.40815 2.2 5.2E-07
8-Jan-08 0.499 -0.5 16.55 1.26E-06
9-Jan-08 0.498 -0.5 15.3 3.33E-12
10-Jan-08 0.500 -0.5 31.15 8.95E-17
11-Jan-08 0.500 -0.5 40.15 2.93E-08
14-Jan-08 0.500 -0.5 22.15 8.05E-05
15-Jan-08 0.403 -0.5 7.05 1.11E-05
16-Jan-08 0.484 -0.5 12.25 0.000412
17-Jan-08 0.240 -0.45702 2.7 0.000162
18-Jan-08 0.335 -0.49997 5.3 1.03E-98
21-Jan-08 0.500 -0.5 128.35 1.5E-06
22-Jan-08 0.498 -0.5 17.95 2.26E-10
23-Jan-08 0.500 -0.5 31.55 0.00048
24-Jan-08 0.075 -0.49866 3.5 5.44E-09
25-Jan-08 0.500 -0.5 28.5 7.64E-06
28-Jan-08 0.489 -0.5 15.75 0.000135
29-Jan-08 0.361 -0.49992 5.25 8.64E-05
30-Jan-08 0.408 -0.49999 6.1 5.16E-13
31-Jan-08 0.500 -0.5 31 6.28E-06
1-Feb-08 0.492 -0.5 12.2 1.19E-05
4-Feb-08 0.485 -0.5 11.35 0.000728
5-Feb-08 0.279 -0.12408 1.45 0.000262
6-Feb-08 0.304 -0.49509 3.8 6.25E-05
7-Feb-08 0.430 -0.5 7.75 7.51E-05
8-Feb-08 0.418 -0.5 7.3 2.22E-16
11-Feb-08 0.500 -0.5 42 4.19E-07
12-Feb-08 0.499 -0.5 19.45 1.9E-07

55
13-Feb-08 0.500 -0.5 20.9 9.61E-06
14-Feb-08 0.487 -0.5 13.8 0.000201
15-Feb-08 0.293 -0.5 5.75 0.00073
18-Feb-08 0.009 -0.47514 2.3 9.54E-11
19-Feb-08 0.500 -0.5 33.25 2.48E-07
20-Feb-08 0.500 -0.5 22.4 1.86E-05
21-Feb-08 0.475 -0.5 13.4 0.000174
22-Feb-08 0.312 -0.5 6.75 1.47E-13
25-Feb-08 0.500 -0.5 44.3 3.06E-05
26-Feb-08 0.458 -0.5 12.8 2.07E-05
27-Feb-08 0.473 -0.5 13.6 8.7E-05
28-Feb-08 0.405 -0.5 9 4.22E-06
29-Feb-08 0.494 -0.5 12.7 6.43E-05
3-Mar-08 0.428 -0.5 7.2 1.17E-18
4-Mar-08 0.500 -0.5 42.05 0.000142
5-Mar-08 0.369 -0.49996 5.45 0.000106
7-Mar-08 0.395 -0.5 6.4 3.13E-12
10-Mar-08 0.500 -0.5 32.7 5.78E-19
11-Mar-08 0.500 -0.5 45.7 0.000124
12-Mar-08 0.376 -0.5 5.95 5.13E-10
13-Mar-08 0.500 -0.5 28.2 2.69E-07
14-Mar-08 0.500 -0.5 19.8 1.3E-09
17-Mar-08 0.500 -0.5 28.5 3.21E-05
18-Mar-08 0.462 -0.5 10.75 1.83E-06
19-Mar-08 0.497 -0.5 17.6 1.9E-08
24-Mar-08 0.500 -0.5 27.4 2.21E-05
25-Mar-08 0.471 -0.5 12.75 7.22E-89
26-Mar-08 0.500 0.5 0.05 0.000192
27-Mar-08 0.334 -0.5 5.7 1.09E-05
28-Mar-08 0.485 -0.5 15.4 3.72E-05
31-Mar-08 0.453 -0.5 12.4 0.000552
1-Apr-08 0.318 -0.05623 1.45 1.31E-06
2-Apr-08 0.498 -0.5 14.1 4.97E-06
3-Apr-08 0.493 -0.5 11.9

56
12.3 3-Month

0.279 0.399087 0.2 0.000279
10-Dec-07 0.268 0.258373 0.5 0.001224
11-Dec-07 0.495 -0.5 10.95 2.63E-06
12-Dec-07 0.211 -0.16683 1.45 0.000475
13-Dec-07 0.489 -0.5 9.85 5.99E-06
14-Dec-07 0.500 -0.5 39.25 7.15E-23
17-Dec-07 0.500 -0.5 34.95 1.19E-18
18-Dec-07 0.228 -0.11789 1.35 0.000519
19-Dec-07 0.500 -0.5 35.9 5.89E-19
20-Dec-07 0.500 -0.5 31.15 2.15E-15
24-Dec-07 0.213 -0.34444 2 0.0004
26-Dec-07 0.329 -0.49136 3.75 0.000161
27-Dec-07 0.248 -0.23091 1.7 0.00045
28-Dec-07 0.430 -0.5 6.75 4.8E-05
31-Dec-07 0.498 -0.5 14.25 1.06E-06
1-Jan-08 0.346 -0.47966 3.55 0.000134
2-Jan-08 0.416 -0.49971 5.3 5.87E-05
3-Jan-08 0.500 -0.5 16.1 2.74E-08
4-Jan-08 0.464 -0.5 7.3 2.27E-05
7-Jan-08 0.233 -0.36626 2.2 0.000318
8-Jan-08 0.500 -0.5 16.55 3.04E-08
9-Jan-08 0.500 -0.5 15.3 1.04E-07
10-Jan-08 0.500 -0.5 31.15 2.16E-16
11-Jan-08 0.500 -0.5 40.15 1.33E-23
14-Jan-08 0.500 -0.5 22.15 1.99E-10
15-Jan-08 0.445 -0.5 7.05 4.07E-05
16-Jan-08 0.497 -0.5 12.25 1.99E-06
17-Jan-08 0.285 -0.42947 2.7 0.000287
18-Jan-08 0.395 -0.49985 5.3 9.09E-05
21-Jan-08 0.500 -0.5 128.35 1.9E-167
22-Jan-08 0.500 -0.5 17.95 5.14E-08
23-Jan-08 0.500 -0.5 31.55 1.48E-14
24-Jan-08 0.316 -0.48558 3.5 0.000243
25-Jan-08 0.500 -0.5 28.5 1.22E-12
28-Jan-08 0.499 -0.5 15.75 4.52E-07
29-Jan-08 0.382 -0.49988 5.25 0.000119
30-Jan-08 0.408 -0.49999 6.1 8.58E-05
31-Jan-08 0.500 -0.5 31 4.05E-13
1-Feb-08 0.498 -0.5 12.2 1.23E-06
4-Feb-08 0.496 -0.5 11.35 2.67E-06
5-Feb-08 0.209 -0.16783 1.45 0.000661
6-Feb-08 0.331 -0.49138 3.8 0.000188
7-Feb-08 0.466 -0.5 7.75 2.73E-05
8-Feb-08 0.457 -0.5 7.3 3.51E-05
11-Feb-08 0.500 -0.5 42 1.79E-24
12-Feb-08 0.500 -0.5 19.45 5.68E-09

57
13-Feb-08 0.500 -0.5 20.9 1.4E-09
14-Feb-08 0.499 -0.5 13.8 8.88E-07
15-Feb-08 0.399 -0.49997 5.75 9.34E-05
18-Feb-08 0.205 -0.40914 2.3 0.000466
19-Feb-08 0.500 -0.5 33.25 7.06E-16
20-Feb-08 0.500 -0.5 22.4 9.01E-10
21-Feb-08 0.497 -0.5 13.4 1.84E-06
22-Feb-08 0.421 -0.5 6.75 6.82E-05
25-Feb-08 0.500 -0.5 44.3 1.56E-22
26-Feb-08 0.495 -0.5 12.8 3.41E-06
27-Feb-08 0.497 -0.5 13.6 2.33E-06
28-Feb-08 0.468 -0.5 9 2.49E-05
29-Feb-08 0.494 -0.5 12.7 4.22E-06
3-Mar-08 0.465 -0.5 7.2 2.79E-05
4-Mar-08 0.500 -0.5 42.05 5.92E-28
5-Mar-08 0.413 -0.49984 5.45 8.1E-05
7-Mar-08 0.441 -0.49999 6.4 5.26E-05
10-Mar-08 0.500 -0.5 32.7 5.98E-18
11-Mar-08 0.500 -0.5 45.7 5.95E-30
12-Mar-08 0.427 -0.49997 5.95 6.24E-05
13-Mar-08 0.500 -0.5 28.2 2.64E-14
14-Mar-08 0.500 -0.5 19.8 1.92E-09
17-Mar-08 0.500 -0.5 28.5 5.91E-14
18-Mar-08 0.492 -0.5 10.75 6.15E-06
19-Mar-08 0.500 -0.5 17.6 3.39E-08
24-Mar-08 0.500 -0.5 27.4 1.72E-12
25-Mar-08 0.497 -0.5 12.75 2.29E-06
26-Mar-08 0.500 0.5 0.05 9.74E-10
27-Mar-08 0.392 -0.49997 5.7 9.52E-05
28-Mar-08 0.499 -0.5 15.4 4.54E-07
31-Mar-08 0.494 -0.5 12.4 4.08E-06
1-Apr-08 0.188 -0.21243 1.45 0.000742
2-Apr-08 0.498 -0.5 14.1 1.46E-06

58
1-Month Call
N(d1) 0.279131361
0.6
0.4
0.2
0 N(d1) 0.279131361
0 5 10 15 20 25 30 35 40
-0.2
-0.4
-0.6
1-Month Put
0.3
0.2
0.1
0
-0.1 0 5 10 15 20 25 30 35 40
Series1
-0.2
-0.3
-0.4
-0.5
-0.6

59
2-Month Call
0.6
0.5
0.4
0.3 Series1
0.2
0.1
0
0 10 20 30 40 50 60 70
2 month put
0.6
0.4
0.2
0 Series1
0 10 20 30 40 50 60 70
-0.2
-0.4
-0.6

60
3-Month Call
0.6
0.5
0.4
0.3 Series1
0.2
0.1
0
0 20 40 60 80 100
3-Month Put
0.6
0.4
0.2
0 Series1
0 20 40 60 80 100
-0.2
-0.4
-0.6

61
12.1 Analysis
1-Month
Almost all the options in 1 month are ATM options, except some of them i.e
around 10 options are running deep OTM options which is due to high reaction
to the delta because of high volatility in the market. So most of the times it’s a
non-risky investment in this scrip. Traders can hedge their risk effectively in
this scrip.
2-Month
This is one of the safest investment vehicle because from past 6 months, not
even one option is in negative delta which shows an active sign of hedging &
almost all the options are lying in the the range of 0.3 to 0.6 which are of ATM
options. So in all a risk less investment with effective hedging.
3-Month
The same trend has been followed as it was in the 2 month contracts, so it is a
carbon copy of the 2 month call options.

62
12.1.2 Delta for Put Options
1-Month
The scatter diagram has been distributed in a very wide range, there are Deep
OTM Options, ATM Options but not ITM options. Sometimes it is very riskier
because of volatile sessions but only few numbers of options have behaved in
such a way, but the other options have behaved in great way as the highest
turnover providing scrip in F&O segment is supposed to be behaved.
2 & 3 Months
The options have been very very consistent in both these months, almost all the
options are of OTM Options which signifies a risk less investment in this
company scrip. The options which are of deep ITM are not showcased in delta
because it cannot sustain huge values & that part is taken care by gamma.
12.1.2 Gamma
As expected, gamma is positive & it is positively correlated with delta, so it
shows that any increase in the price will lead to increase in the value of the
option & as delta cannot withstand huge values, gamma is used to measure the
pace of change in the values of the delta, in other words it signifies an increase
in the delta will lead to increase in the value of gamma, which again is a
positive sign

63
12.2 Strategies for ACC
 As it can be seen from the analysis, some of them are of OTM options &
for those options which can be riskier sometimes a strategy called as
Strangles can be used which is also a low cost & also has less margin
money.
 Covered call is also one of the recommended strategy for this company
scrip because it is one of the risk less strategy as compared to other
strategies & as most of them are of ATM options so the investment will
be partially protected from decline in the prices which may lead to loss
in the future.
 By going for a covered call, sometimes it provides an additional income
from the traders investment in this scrip.

64
13. Company : Bharti Airtel
1-Month
Date N(d1) N(d2) sigma 0.000279

0.279 0.399087 0.2 3.95E-05
10-Dec-07 0.440 -0.5 14.45 1.06E-14
11-Dec-07 0.500 -0.5 62.95 6.08E-06
12-Dec-07 0.489 -0.5 22.6 1.29E-15
13-Dec-07 0.500 -0.5 70.6 4.29E-07
14-Dec-07 0.499 -0.5 33.85 1.35E-08
17-Dec-07 0.500 -0.5 49.5 0.000474
18-Dec-07 0.099 -0.5 5.7 0.000633
19-Dec-07 0.003 -0.5 4.7 0.000173
20-Dec-07 0.288 -0.5 13.15 4.98E-06
24-Dec-07 0.491 -0.5 53.25 0.000688
26-Dec-07 0.019 -0.5 11.25 0.000418
27-Dec-07 0.117 -0.5 18.05 6.26E-08
28-Dec-07 0.500 -0.5 24 2.64E-19
31-Dec-07 0.500 -0.5 55 9.41E-09
1-Jan-08 0.500 -0.5 28.8 0.001083
2-Jan-08 -0.027 -0.3718 1.35 5.59E-06
3-Jan-08 0.491 -0.5 17.15 0.001764
4-Jan-08 0.212 0.032279 0.75 5.32E-05
7-Jan-08 0.423 -0.5 11.3 2.91E-10
8-Jan-08 0.500 -0.5 38.85 0.000953
9-Jan-08 -0.013 -0.43777 1.75 0.000196
10-Jan-08 0.268 -0.5 6.7 0.00052
11-Jan-08 0.267 -0.44904 2.6 1.54E-13
14-Jan-08 0.500 -0.5 57.5 6.58E-11
15-Jan-08 0.500 -0.5 49.55 0.000229
16-Jan-08 0.259 -0.5 7.75 0.000314
17-Jan-08 0.209 -0.5 6.4 0.001075
18-Jan-08 -0.004 -0.4808 2.25 6.35E-08
21-Jan-08 0.500 -0.5 45.2 0.000138
22-Jan-08 0.338 -0.5 13.45 0.00055
23-Jan-08 0.099 -0.5 5.6 0.000905
24-Jan-08 -0.055 -0.49989 3.7 1.45E-08
25-Jan-08 0.500 -0.5 63.35 1.43E-05
28-Jan-08 0.478 -0.5 46 0.00029
29-Jan-08 0.216 -0.5 18.55 0.001956
30-Jan-08 -0.310 -0.49996 3.1 0.001566
31-Jan-08 -0.161 -0.5 5.2 1.69E-15
1-Feb-08 0.500 -0.5 50.6 2.42E-05
4-Feb-08 0.465 -0.5 13.55 4.91E-05
5-Feb-08 0.429 -0.5 12 5.37E-09
6-Feb-08 0.500 -0.5 35.75 1.49E-08
7-Feb-08 0.500 -0.5 34.75 1.19E-05
8-Feb-08 0.482 -0.5 18.45 5.79E-08

65
11-Feb-08 0.500 -0.5 34.75 0.000117
12-Feb-08 0.359 -0.5 10.6 #DIV/0!
13-Feb-08 #DIV/0! #DIV/0! 0 2.62E-05
14-Feb-08 0.462 -0.5 18.3 0.000665
15-Feb-08 0.097 -0.49891 3.5 0.002993
18-Feb-08 -0.150 -0.35748 0.85 0.000256
19-Feb-08 0.246 -0.5 8.95 4.43E-05
20-Feb-08 0.438 -0.5 21.5 0.001589
21-Feb-08 -0.223 -0.48624 1.75 0.00012
22-Feb-08 0.350 -0.5 17.85 0.002274
25-Feb-08 -0.413 -0.48505 0.9 0.000584
26-Feb-08 0.052 -0.5 10.9 0.00201
27-Feb-08 -0.365 -0.49977 2.45 0.001795
28-Feb-08 -0.196 -0.5 4.4 2.39E-06
29-Feb-08 0.496 -0.5 19.9 4.22E-09
3-Mar-08 0.500 -0.5 34 5.34E-07
4-Mar-08 0.499 -0.5 25.35 2.12E-05
5-Mar-08 0.473 -0.5 15.85 4.74E-93
7-Mar-08 -0.500 -0.5 0.05 1.9E-12
10-Mar-08 0.500 -0.5 54.1 3.09E-05
11-Mar-08 0.460 -0.5 17.05 4.44E-06
12-Mar-08 0.494 -0.5 24.75 5.96E-07
13-Mar-08 0.499 -0.5 32.25 3.61E-06
14-Mar-08 0.495 -0.5 27.75 0.000242
17-Mar-08 0.267 -0.5 10.3 0.000106
18-Mar-08 0.378 -0.5 15.95 7.22E-05
19-Mar-08 0.412 -0.5 19.2 0.000154
24-Mar-08 0.329 -0.5 22.65 9.78E-05
25-Mar-08 0.380 -0.5 33.2 0.000253
26-Mar-08 0.249 -0.5 29.9 0.000359
27-Mar-08 0.170 -0.5 23.3 0.001644
28-Mar-08 -0.090 -0.34256 1.05 0.001046
31-Mar-08 -0.007 -0.44079 1.8 1.34E-06
1-Apr-08 0.498 -0.5 23.15 5.1E-06
2-Apr-08 0.493 -0.5 20 0.000582
3-Apr-08 0.089 -0.49834 3.4

66
13.2 2-Month Call

0.279 0.399087 0.2 0.000279
10-Dec-07 0.497 -0.5 14.45 1.55E-06
11-Dec-07 0.500 -0.5 62.95 1.18E-35
12-Dec-07 0.500 -0.5 22.6 5.87E-09
13-Dec-07 0.500 -0.5 70.6 6.27E-42
14-Dec-07 0.500 -0.5 33.85 1.95E-13
17-Dec-07 0.500 -0.5 49.5 9.14E-22
18-Dec-07 0.363 -0.49999 5.7 0.000122
19-Dec-07 0.281 -0.49983 4.7 0.000202
20-Dec-07 0.489 -0.5 13.15 7.27E-06
24-Dec-07 0.500 -0.5 53.25 1.95E-21
26-Dec-07 0.468 -0.5 11.25 2.08E-05
27-Dec-07 0.498 -0.5 18.05 1.3E-06
28-Dec-07 0.500 -0.5 24 6.79E-08
31-Dec-07 0.500 -0.5 55 2.63E-19
1-Jan-08 0.500 -0.5 28.8 1.69E-12
2-Jan-08 0.243 -0.11765 1.35 0.00062
3-Jan-08 0.500 -0.5 17.15 1.87E-07
4-Jan-08 0.209 0.075713 0.75 0.001231
7-Jan-08 0.484 -0.5 11.3 9.78E-06
8-Jan-08 0.500 -0.5 38.85 9.07E-17
9-Jan-08 0.234 -0.27458 1.75 0.00052
10-Jan-08 0.386 -0.5 6.7 8.11E-05
11-Jan-08 0.269 -0.43325 2.6 0.000334
14-Jan-08 0.500 -0.5 57.5 1.48E-27
15-Jan-08 0.500 -0.5 49.55 2.18E-21
16-Jan-08 0.416 -0.5 7.75 6.7E-05
17-Jan-08 0.374 -0.5 6.4 0.000109
18-Jan-08 0.211 -0.41281 2.25 0.000518
21-Jan-08 0.500 -0.5 45.2 9.13E-17
22-Jan-08 0.484 -0.5 13.45 1.08E-05
23-Jan-08 0.321 -0.49999 5.6 0.000175
24-Jan-08 0.237 -0.49706 3.7 0.000334
25-Jan-08 0.500 -0.5 63.35 1.05E-25
28-Jan-08 0.500 -0.5 46 5.69E-15
29-Jan-08 0.500 -0.5 18.55 7.2E-08
30-Jan-08 0.261 -0.47724 3.1 0.000299
31-Jan-08 0.361 -0.4999 5.2 0.000128
1-Feb-08 0.500 -0.5 50.6 5.35E-26
4-Feb-08 0.495 -0.5 13.55 3.22E-06
5-Feb-08 0.488 -0.5 12 7.45E-06
6-Feb-08 0.500 -0.5 35.75 2.26E-14
7-Feb-08 0.500 -0.5 34.75 1.2E-13
8-Feb-08 0.500 -0.5 18.45 2.92E-07
11-Feb-08 0.500 -0.5 34.75 6.81E-13
12-Feb-08 0.468 -0.5 10.6 2.33E-05

67
13-Feb-08 #DIV/0! #DIV/0! 0 #DIV/0!
14-Feb-08 0.499 -0.5 18.3 6.87E-07
15-Feb-08 0.276 -0.49215 3.5 0.000297
18-Feb-08 0.315 0.141473 0.85 0.001135
19-Feb-08 0.427 -0.5 8.95 5.64E-05
20-Feb-08 0.500 -0.5 21.5 2.97E-07
21-Feb-08 0.214 -0.3114 1.75 0.000743
22-Feb-08 0.496 -0.5 17.85 2.52E-06
25-Feb-08 0.237 0.005917 0.9 0.001514
26-Feb-08 0.439 -0.5 10.9 4.76E-05
27-Feb-08 0.193 -0.45295 2.45 0.000626
28-Feb-08 0.190 -0.49986 4.4 0.000355
29-Feb-08 0.500 -0.5 19.9 3.72E-08
3-Mar-08 0.500 -0.5 34 4.66E-14
4-Mar-08 0.500 -0.5 25.35 6.6E-10
5-Mar-08 0.498 -0.5 15.85 1.12E-06
7-Mar-08 0.500 0.5 0.05 3.1E-24
10-Mar-08 0.500 -0.5 54.1 5.95E-25
11-Mar-08 0.499 -0.5 17.05 9.58E-07
12-Mar-08 0.500 -0.5 24.75 6.16E-09
13-Mar-08 0.500 -0.5 32.25 1.34E-11
14-Mar-08 0.500 -0.5 27.75 1.05E-09
17-Mar-08 0.456 -0.5 10.3 3.77E-05
18-Mar-08 0.495 -0.5 15.95 3.79E-06
19-Mar-08 0.499 -0.5 19.2 8.22E-07
24-Mar-08 0.499 -0.5 22.65 3.37E-07
25-Mar-08 0.500 -0.5 33.2 5.37E-10
26-Mar-08 0.500 -0.5 29.9 8.11E-09
27-Mar-08 0.499 -0.5 23.3 4E-07
28-Mar-08 0.123 -0.17912 1.05 0.001606
31-Mar-08 0.124 -0.39018 1.8 0.000995
1-Apr-08 0.500 -0.5 23.15 1.13E-09
2-Apr-08 0.500 -0.5 20 1.92E-08
3-Apr-08 0.277 -0.48739 3.4 0.000268

68
13.3. 3-Month

0.279 0.399087 0.2 0.000279
10-Dec-07 0.500 -0.5 14.45 1.74E-07
11-Dec-07 0.500 -0.5 62.95 3.04E-52
12-Dec-07 0.500 -0.5 22.6 3.56E-11
13-Dec-07 0.500 -0.5 70.6 8.89E-63
14-Dec-07 0.500 -0.5 33.85 2.69E-18
17-Dec-07 0.500 -0.5 49.5 4.55E-32
18-Dec-07 0.409 -0.49996 5.7 7.08E-05
19-Dec-07 0.343 -0.49943 4.7 0.000128
20-Dec-07 0.498 -0.5 13.15 1.09E-06
24-Dec-07 0.500 -0.5 53.25 2.36E-33
26-Dec-07 0.492 -0.5 11.25 4.77E-06
27-Dec-07 0.500 -0.5 18.05 4.38E-08
28-Dec-07 0.500 -0.5 24 1.92E-10
31-Dec-07 0.500 -0.5 55 4.58E-32
1-Jan-08 0.500 -0.5 28.8 6.4E-16
2-Jan-08 0.260 -0.06457 1.35 0.000494
3-Jan-08 0.500 -0.5 17.15 1.03E-08
4-Jan-08 0.216 0.117091 0.75 0.000999
7-Jan-08 0.496 -0.5 11.3 2.29E-06
8-Jan-08 0.500 -0.5 38.85 3.73E-23
9-Jan-08 0.241 -0.23911 1.75 0.000411
10-Jan-08 0.446 -0.5 6.7 3.69E-05
11-Jan-08 0.283 -0.41327 2.6 0.000257
14-Jan-08 0.500 -0.5 57.5 2E-41
15-Jan-08 0.500 -0.5 49.55 9.82E-32
16-Jan-08 0.461 -0.5 7.75 2.83E-05
17-Jan-08 0.430 -0.5 6.4 5.52E-05
18-Jan-08 0.256 -0.36886 2.25 0.000367
21-Jan-08 0.500 -0.5 45.2 2.08E-25
22-Jan-08 0.498 -0.5 13.45 1.39E-06
23-Jan-08 0.373 -0.49997 5.6 0.000105
24-Jan-08 0.300 -0.49269 3.7 0.000214
25-Jan-08 0.500 -0.5 63.35 1.46E-42
28-Jan-08 0.500 -0.5 46 6.16E-24
29-Jan-08 0.500 -0.5 18.55 6.41E-08
30-Jan-08 0.263 -0.4767 3.1 0.000295
31-Jan-08 0.363 -0.4999 5.2 0.000125
1-Feb-08 0.500 -0.5 50.6 3.92E-37
4-Feb-08 0.499 -0.5 13.55 3.96E-07
5-Feb-08 0.498 -0.5 12 1.36E-06
6-Feb-08 0.500 -0.5 35.75 3.61E-20
7-Feb-08 0.500 -0.5 34.75 3.95E-19
8-Feb-08 0.500 -0.5 18.45 6.96E-09
11-Feb-08 0.500 -0.5 34.75 2.09E-18

69
12-Feb-08 0.492 -0.5 10.6 5.48E-06
13-Feb-08 #DIV/0! #DIV/0! 0 #DIV/0!
14-Feb-08 0.500 -0.5 18.3 1.63E-08
15-Feb-08 0.324 -0.48365 3.5 0.000193
18-Feb-08 0.308 0.171512 0.85 0.00086
19-Feb-08 0.475 -0.5 8.95 1.75E-05
20-Feb-08 0.500 -0.5 21.5 1.81E-09
21-Feb-08 0.166 -0.31761 1.75 0.000576
22-Feb-08 0.500 -0.5 17.85 6.62E-08
25-Feb-08 0.267 0.091295 0.9 0.000994
26-Feb-08 0.487 -0.5 10.9 9.42E-06
27-Feb-08 0.250 -0.41637 2.45 0.00039
28-Feb-08 0.334 -0.49881 4.4 0.000171
29-Feb-08 0.500 -0.5 19.9 3.36E-08
3-Mar-08 0.500 -0.5 34 3.39E-20
4-Mar-08 0.500 -0.5 25.35 2.63E-13
5-Mar-08 0.500 -0.5 15.85 4.74E-08
7-Mar-08 0.500 0.5 0.05 5.25E-29
10-Mar-08 0.500 -0.5 54.1 2.49E-40
11-Mar-08 0.500 -0.5 17.05 2.1E-08
12-Mar-08 0.500 -0.5 24.75 2.84E-12
13-Mar-08 0.500 -0.5 32.25 3.66E-17
14-Mar-08 0.500 -0.5 27.75 7.29E-14
17-Mar-08 0.491 -0.5 10.3 7.32E-06
18-Mar-08 0.500 -0.5 15.95 1.24E-07
19-Mar-08 0.500 -0.5 19.2 6.77E-09
24-Mar-08 0.500 -0.5 22.65 4.12E-10
25-Mar-08 0.500 -0.5 33.2 6.41E-16
26-Mar-08 0.500 -0.5 29.9 1.22E-13
27-Mar-08 0.500 -0.5 23.3 4E-10
28-Mar-08 0.120 -0.12974 1.05 0.001062
31-Mar-08 0.157 -0.34007 1.8 0.000615
1-Apr-08 0.500 -0.5 23.15 1.28E-09
2-Apr-08 0.500 -0.5 20 2.47E-08
3-Apr-08 0.251 -0.49013 3.4 0.000291

70
1-Month Call
0.6
0.4
0.2
0 Series1
0 5 10 15 20 25 30 35 40
-0.2
-0.4
-0.6
1- Month Put
0.1
0
0 5 10 15 20 25 30 35 40
-0.1
-0.2
Series1
-0.3
-0.4
-0.5
-0.6

71
2-Month Call
0.6
0.5
0.4
0.3 Series1
0.2
0.1
0
0 10 20 30 40 50 60 70
2-Month Put
0.6
0.4
0.2
0 Series1
0 10 20 30 40 50 60 70
-0.2
-0.4
-0.6

72
3-Month call
0.6
0.5
0.4
0.3 Series1
0.2
0.1
0
0 20 40 60 80 100
3-month put
0.6
0.4
0.2
0 Series1
0 20 40 60 80 100
-0.2
-0.4
-0.6

73
13.1. Analysis
1-Month
The scatter diagram in this type of option has been wide spread in the range of
-0.5 to + 0.5 which is a combination of Deep OTM, Deep ATM options but
most of them are ATM options so it is a bit riskier investment because it is
spread all over graph, so the effectiveness of hedging may not be upto expected
extent, so exercising this option may prove insignificant sometimes.
2-Months
It is quiet consistent in not letting the traders going into loss for those who
think of investing in this scrip because not even one option has gone OTM,
each & every option has been consistent in proving itself as an effective
hedging tool for the traders with absolutely no risk.
3- Months
The same trend has been continued by these 3 month contracts as well because
it also has proved itself as a consistent performer with zero risk & as an
effective hedging tool.
13.1.2. Put Options

1-Month
As the single month option trend goes on it always has been a bit volatile & as
the delta will be volatile, the contract gets riskier to exercise as it is nearing the
expiry time, the delta is consistent with -0.5 as it is nearing the expiry time.

74
2-Month
This term contract was very consistent as a risk less hedge tool but as the
expiry is nearing it has been proving itself as a riskier one because it is moving
towards OTM options from ATM, so exercising this may cause some harm to
the trader. Hence it can prove as a riskier one in volatile sessions because it is
reacting fastly with the change in the spot price. Simultaneously there are
deltas which are running deep OTM with ATM options.
3-Month
The same trend has been followed by the 3 month contracts also because of
some volatile sessions the delta is approaching to -0.3 as the time to expiry is
nearing, the reasons are same as are for the 2 month contracts
13.2 Strategies for Bharti Airtel

 As it has been acting very aggressive sometimes it involves some
amount of risk, so purchasing a naked call is suggestible for this scrip if
& only if there are more volatile sessions expected in the future.
 Protective put is a perfect strategy for this because it is not volatile
always but there is always some amount of risk element expected in this
scrip at regular intervals, so going ahead with this type of strategy
always safeguards the traders for facing such type of risk & volatility.
 Going for a protective put is a two fold benefit option wherein a trader
can withstand with a blend of risk & volatility.

75
14. Company: CAIRN INDIA
14.1. 1-Month
0.279 0.399087 0.2 0.000279
10-Dec-07 0.146 -0.49978 4.1 0.001979
11-Dec-07 -0.032 -0.40661 1.45 0.006206
12-Dec-07 0.250 -0.5 6.95 0.001034
13-Dec-07 -0.052 -0.29777 0.9 0.010253
14-Dec-07 0.254 -0.5 7 0.001056
17-Dec-07 0.321 -0.5 11.55 0.000638
18-Dec-07 0.078 -0.49959 3.7 0.003088
19-Dec-07 -0.500 -0.4999 0.1 0.000105
20-Dec-07 0.169 -0.5 5.7 0.002052
24-Dec-07 0.161 -0.5 9.2 0.001883
26-Dec-07 0.206 -0.5 8.45 0.003224
27-Dec-07 0.406 -0.32341 2.3 0.005693
28-Dec-07 0.305 -0.4915 3.55 0.00103
31-Dec-07 0.434 -0.5 9.9 0.000173
1-Jan-08 0.415 -0.5 9.2 0.000237
2-Jan-08 0.279 -0.49991 4.8 0.000903
3-Jan-08 0.449 -0.5 11.4 0.000131
4-Jan-08 0.348 -0.5 6.7 0.000494
7-Jan-08 0.255 -0.3419 1.95 0.002422
8-Jan-08 0.371 -0.5 8.4 0.000397
9-Jan-08 0.118 -0.34254 1.55 0.003969
10-Jan-08 0.396 -0.5 10 0.00031
11-Jan-08 0.220 -0.49804 3.7 0.001628
14-Jan-08 0.181 -0.45675 2.4 0.002859
15-Jan-08 0.429 0.234521 1.05 0.002575
16-Jan-08 0.280 -0.5 8.2 0.000768
17-Jan-08 0.054 -0.49557 2.95 0.002911
18-Jan-08 0.369 -0.5 12.45 0.000407
21-Jan-08 0.419 -0.5 17.75 0.00025
22-Jan-08 0.437 -0.5 20.65 0.000208
23-Jan-08 0.183 -0.5 9.95 0.001246
24-Jan-08 0.214 -0.5 7.4 0.001779
25-Jan-08 0.327 -0.5 13.35 0.000748
28-Jan-08 0.198 -0.5 8.75 0.0023
29-Jan-08 0.243 -0.5 13.2 0.001614
30-Jan-08 0.188 -0.5 8.05 0.004275
31-Jan-08 0.378 -0.23615 1.85 0.010728
1-Feb-08 0.405 -0.5 9 0.000339
4-Feb-08 0.374 -0.5 8.1 0.000472
5-Feb-08 0.050 -0.38078 1.55 0.004878
6-Feb-08 0.182 -0.49971 4.15 0.001714
7-Feb-08 0.382 -0.5 10.3 0.000414
8-Feb-08 0.182 -0.49998 4.8 0.001679
11-Feb-08 0.077 -0.4986 3.4 0.0028
12-Feb-08 0.367 -0.5 11 0.000464

76
13-Feb-08 0.083 -0.49971 3.85 0.002435
14-Feb-08 0.219 -0.5 6.9 0.001176
15-Feb-08 -0.285 -0.46416 1.2 0.00604
18-Feb-08 0.125 -0.5 5.35 0.001956
19-Feb-08 0.083 -0.5 4.9 0.002371
20-Feb-08 0.072 -0.5 5.25 0.00242
21-Feb-08 0.033 -0.49999 4.5 0.002992
22-Feb-08 0.093 -0.5 6.85 0.00214
25-Feb-08 -0.023 -0.5 5.6 0.003701
26-Feb-08 0.139 -0.5 12.6 0.001788
27-Feb-08 -0.432 -0.49638 1.25 0.008928
28-Feb-08 -0.319 -0.48464 1.3 0.017215
29-Feb-08 0.209 -0.49947 4.1 0.001344
3-Mar-08 0.303 -0.5 6.75 0.000722
4-Mar-08 0.288 -0.49782 3.9 0.00136
5-Mar-08 0.294 -0.5 6.85 0.000803
7-Mar-08 0.074 -0.39055 1.65 0.004846
10-Mar-08 0.446 -0.5 14.7 0.000155
11-Mar-08 0.299 -0.5 7.3 0.000795
12-Mar-08 0.456 -0.5 16.3 0.000114
13-Mar-08 0.498 -0.5 29.6 4.88E-06
14-Mar-08 0.331 -0.5 10.25 0.000571
17-Mar-08 0.362 -0.5 13.75 0.000451
18-Mar-08 0.120 -0.5 5.25 0.0021
19-Mar-08 0.051 -0.49955 3.6 0.003321
24-Mar-08 0.294 -0.5 20.9 0.000743
25-Mar-08 0.159 -0.5 13.7 0.001673
26-Mar-08 -0.132 -0.5 5.1 0.006686
27-Mar-08 -0.164 -0.49999 3.9 0.008307
28-Mar-08 0.471 -0.5 13.9 7.66E-05
31-Mar-08 0.232 -0.49997 4.9 0.00117
1-Apr-08 0.222 -0.49993 4.65 0.001257
2-Apr-08 0.309 -0.5 7.25 0.000691
3-Apr-08 0.314 -0.5 7.45 0.000654

77
14.2. 2-Month

0.279 0.399087 0.2 0.000279
10-Dec-07 0.301 -0.498 4.1 0.000849
11-Dec-07 0.160 -0.24624 1.45 0.003202
12-Dec-07 0.409 -0.5 6.95 0.000291
13-Dec-07 0.214 0.012697 0.9 0.00471
14-Dec-07 0.416 -0.5 7 0.000268
17-Dec-07 0.480 -0.5 11.55 5.51E-05
18-Dec-07 0.274 -0.49536 3.7 0.001074
19-Dec-07 0.479 0.48861 0.1 0.006734
20-Dec-07 0.365 -0.49999 5.7 0.000502
24-Dec-07 0.437 -0.5 9.2 0.000178
26-Dec-07 0.426 -0.5 8.45 0.000218
27-Dec-07 0.294 -0.37894 2.3 0.001641
28-Dec-07 0.252 -0.49481 3.55 0.00118
31-Dec-07 0.434 -0.5 9.9 0.000173
1-Jan-08 0.475 -0.5 9.2 6.47E-05
2-Jan-08 0.373 -0.49944 4.8 0.000446
3-Jan-08 0.491 -0.5 11.4 2.21E-05
4-Jan-08 0.431 -0.5 6.7 0.000194
7-Jan-08 0.330 -0.23138 1.95 0.001324
8-Jan-08 0.443 -0.5 8.4 0.000144
9-Jan-08 0.338 -0.07691 1.55 0.001694
10-Jan-08 0.473 -0.5 10 7.07E-05
11-Jan-08 0.317 -0.49249 3.7 0.000826
14-Jan-08 0.160 -0.44916 2.4 0.001802
15-Jan-08 0.297 0.051366 1.05 0.003223
16-Jan-08 0.435 -0.5 8.2 0.000194
17-Jan-08 0.261 -0.47132 2.95 0.001318
18-Jan-08 0.484 -0.5 12.45 4.29E-05
21-Jan-08 0.498 -0.5 17.75 5.19E-06
22-Jan-08 0.500 -0.5 20.65 1.44E-06
23-Jan-08 0.446 -0.5 9.95 0.000182
24-Jan-08 0.348 -0.5 7.4 0.00055
25-Jan-08 0.481 -0.5 13.35 5.68E-05
28-Jan-08 0.406 -0.5 8.75 0.000344
29-Jan-08 0.496 -0.5 13.2 1.11E-05
30-Jan-08 0.449 -0.5 8.05 0.000169
31-Jan-08 0.228 -0.30353 1.85 0.002374
1-Feb-08 0.464 -0.5 9 0.000113
4-Feb-08 0.444 -0.5 8.1 0.000177
5-Feb-08 0.254 -0.19 1.55 0.002601
6-Feb-08 0.333 -0.49762 4.15 0.000797
7-Feb-08 0.473 -0.5 10.3 8.6E-05
8-Feb-08 0.339 -0.49972 4.8 0.000738
11-Feb-08 0.278 -0.48898 3.4 0.001337

78
12-Feb-08 0.474 -0.5 11 8.12E-05
13-Feb-08 0.209 -0.49848 3.85 0.001293
14-Feb-08 0.393 -0.5 6.9 0.00038
15-Feb-08 0.286 -0.03195 1.2 0.003478
18-Feb-08 0.351 -0.49997 5.35 0.000631
19-Feb-08 0.332 -0.49986 4.9 0.000772
20-Feb-08 0.336 -0.49996 5.25 0.000739
21-Feb-08 0.316 -0.49951 4.5 0.000922
22-Feb-08 0.374 -0.5 6.85 0.000494
25-Feb-08 0.325 -0.49999 5.6 0.00077
26-Feb-08 0.466 -0.5 12.6 9.59E-05
27-Feb-08 0.347 0.017431 1.25 0.003083
28-Feb-08 0.158 -0.23459 1.3 0.004715
29-Feb-08 0.344 -0.49656 4.1 0.000659
3-Mar-08 0.417 -0.5 6.75 0.000272
4-Mar-08 0.317 -0.49563 3.9 0.000834
5-Mar-08 0.412 -0.5 6.85 0.000298
7-Mar-08 0.256 -0.22372 1.65 0.002503
10-Mar-08 0.496 -0.5 14.7 1.08E-05
11-Mar-08 0.419 -0.5 7.3 0.000257
12-Mar-08 0.498 -0.5 16.3 4.78E-06
13-Mar-08 0.500 -0.5 29.6 5.44E-10
14-Mar-08 0.464 -0.5 10.25 0.000101
17-Mar-08 0.486 -0.5 13.75 3.77E-05
18-Mar-08 0.335 -0.49996 5.25 0.000675
19-Mar-08 0.283 -0.49384 3.6 0.001162
24-Mar-08 0.499 -0.5 20.9 2.92E-06
25-Mar-08 0.474 -0.5 13.7 7.16E-05
26-Mar-08 0.242 -0.49998 5.1 0.001065
27-Mar-08 0.178 -0.49922 3.9 0.001544
28-Mar-08 0.470 -0.5 13.9 7.82E-05
31-Mar-08 0.221 -0.49998 4.9 0.001193
1-Apr-08 0.330 -0.49951 4.65 0.000594
2-Apr-08 0.427 -0.5 7.25 0.000215
3-Apr-08 0.434 -0.5 7.45 0.000188

79
14.3. 3-month

0.279 0.399087 0.2 0.000279
10-Dec-07 0.356 -0.4949 4.1 0.000556
11-Dec-07 0.232 -0.14333 1.45 0.002316
12-Dec-07 0.454 -0.5 6.95 0.000138
13-Dec-07 0.288 0.140008 0.9 0.003203
14-Dec-07 0.455 -0.5 7 0.000131
17-Dec-07 0.495 -0.5 11.55 1.23E-05
18-Dec-07 0.310 -0.49129 3.7 0.000757
19-Dec-07 0.481 0.492346 0.1 0.004727
20-Dec-07 0.414 -0.49995 5.7 0.00028
24-Dec-07 0.479 -0.5 9.2 5.52E-05
26-Dec-07 0.469 -0.5 8.45 8.1E-05
27-Dec-07 0.306 -0.34602 2.3 0.001178
28-Dec-07 0.335 -0.48471 3.55 0.000685
31-Dec-07 0.482 -0.5 9.9 4.41E-05
1-Jan-08 0.489 -0.5 9.2 2.62E-05
2-Jan-08 0.396 -0.49889 4.8 0.000321
3-Jan-08 0.497 -0.5 11.4 5.93E-06
4-Jan-08 0.455 -0.5 6.7 0.000114
7-Jan-08 0.279 -0.26211 1.95 0.001254
8-Jan-08 0.477 -0.5 8.4 5.65E-05
9-Jan-08 0.262 -0.14633 1.55 0.001711
10-Jan-08 0.490 -0.5 10 2.33E-05
11-Jan-08 0.328 -0.48921 3.7 0.000632
14-Jan-08 0.270 -0.38748 2.4 0.001172
15-Jan-08 0.268 0.050543 1.05 0.002722
16-Jan-08 0.469 -0.5 8.2 8.39E-05
17-Jan-08 0.290 -0.45604 2.95 0.00095
18-Jan-08 0.497 -0.5 12.45 7.88E-06
21-Jan-08 0.500 -0.5 17.75 2.05E-07
22-Jan-08 0.500 -0.5 20.65 2.09E-08
23-Jan-08 0.482 -0.5 9.95 5.44E-05
24-Jan-08 0.447 -0.5 7.4 0.000189
25-Jan-08 0.497 -0.5 13.35 7.76E-06
28-Jan-08 0.462 -0.5 8.75 0.000123
29-Jan-08 0.496 -0.5 13.2 1.09E-05
30-Jan-08 0.447 -0.5 8.05 0.000172
31-Jan-08 0.169 -0.34649 1.85 0.002572
1-Feb-08 0.486 -0.5 9 4.11E-05
4-Feb-08 0.477 -0.5 8.1 6.89E-05
5-Feb-08 0.302 -0.09264 1.55 0.001807
6-Feb-08 0.371 -0.4947 4.15 0.000524
7-Feb-08 0.492 -0.5 10.3 2.28E-05
8-Feb-08 0.384 -0.49917 4.8 0.000458
11-Feb-08 0.314 -0.48036 3.4 0.000925

80
12-Feb-08 0.494 -0.5 11 1.8E-05
13-Feb-08 0.343 -0.49182 3.85 0.000688
14-Feb-08 0.446 -0.5 6.9 0.00017
15-Feb-08 0.315 0.052021 1.2 0.002397
18-Feb-08 0.402 -0.49986 5.35 0.000348
19-Feb-08 0.383 -0.49949 4.9 0.000444
20-Feb-08 0.389 -0.49985 5.25 0.000412
21-Feb-08 0.362 -0.49863 4.5 0.000553
22-Feb-08 0.433 -0.5 6.85 0.000222
25-Feb-08 0.394 -0.49996 5.6 0.000384
26-Feb-08 0.495 -0.5 12.6 1.26E-05
27-Feb-08 0.335 0.04768 1.25 0.002224
28-Feb-08 0.328 0.014461 1.3 0.002234
29-Feb-08 0.344 -0.49656 4.1 0.000659
3-Mar-08 0.453 -0.5 6.75 0.000133
4-Mar-08 0.342 -0.49209 3.9 0.000586
5-Mar-08 0.454 -0.5 6.85 0.000139
7-Mar-08 0.199 -0.24313 1.65 0.002114
10-Mar-08 0.500 -0.5 14.7 6.19E-07
11-Mar-08 0.461 -0.5 7.3 0.000106
12-Mar-08 0.500 -0.5 16.3 1.54E-07
13-Mar-08 0.500 -0.5 29.6 1.12E-14
14-Mar-08 0.492 -0.5 10.25 2.1E-05
17-Mar-08 0.499 -0.5 13.75 2.37E-06
18-Mar-08 0.401 -0.49978 5.25 0.000339
19-Mar-08 0.300 -0.4898 3.6 0.00079
24-Mar-08 0.500 -0.5 20.9 1.15E-08
25-Mar-08 0.498 -0.5 13.7 4.73E-06
26-Mar-08 0.364 -0.49983 5.1 0.000484
27-Mar-08 0.316 -0.49511 3.9 0.000763
28-Mar-08 0.498 -0.5 13.9 4.58E-06
31-Mar-08 0.354 -0.49971 4.9 0.000519
1-Apr-08 0.352 -0.49933 4.65 0.000545
2-Apr-08 0.434 -0.5 7.25 0.000202
3-Apr-08 0.439 -0.5 7.45 0.00018

81
1-Month Call
0.6
0.4
0.2
0 Series1
0 5 10 15 20 25 30 35 40
-0.2
-0.4
-0.6
1-Month Put
0.3
0.2
0.1
0
-0.1 0 5 10 15 20 25 30 35 40
Series1
-0.2
-0.3
-0.4
-0.5
-0.6

82
2-Month Call
0.600
0.500
0.400
0.300 Series1
0.200
0.100
0.000
0 10 20 30 40 50 60 70
2-Month Put
0.6
0.4
0.2
0 Series1
0 10 20 30 40 50 60 70
-0.2
-0.4
-0.6

83
3-month call
0.6
0.5
0.4
0.3 Series1
0.2
0.1
0
0 20 40 60 80 100
3 month put
0.6
0.4
0.2
0 Series1
0 20 40 60 80 100
-0.2
-0.4
-0.6

84
14.2. Analysis of the Graphs
14.2.1. Delta for Call Options
1-Month
Around 6 options are of deep OTM which are very insignificant to exercise the
option, almost all of the options are moving towards +0.4 which is a healthy
sign of exercising the option with hedging effectiveness, as analysed from the
previous diagram the high pace of change in delta has been measured by
gamma & also the values exceeding +0.6 which are fast changing are measured
by gamma.
2-Month
A cluster has been formed in the graph wherein it is representing or the data is
ranging between 0.3 & 0.6, this is sharply moving to 0.4 to 0.5 which is a clear
indication of effective hedging. This can also be said as one of the risk free
investment.
3-month
14.2.2. Put options
1-Month
The options are being very consistent in behaving as a ATM options but there
is some amount of risk which can be expected because some of the options are
moving to OTM, which cautions the trader of taking some safe positions in the
market

85
2-Month
Almost all the options are consistent in performing well as the date to expiry is
nearing but some times the options are turning out to be aggressive which may
be due to systematic as well as unsystematic risks, so this option can be
effectively hedged but believing completely on this option in times of volatility
may not work out well.
3-Month
The same trend is followed in case of this one also, one out of 10 or 15 option
has been quiet deviating that too at a very slow rate. So investing in this option
will not harm any of the trader. In all a risk free trading in this company.
14.2.3. Gamma
The change in pace of delta which is shown by gamma is bit fast as compared
to the other companies. As these are going to be ATM options with expiry time
nearing. Naturally the gamma will be higher, but the gamma has again taken a
slow pace of change in 2 month. It is very slowly.
14.3. Strategies for Cairn India
 Covered call writing is one of the recommended strategy for this

company because most of them are OTM Options so to secure the price
appreciation along with a premium, a trader can go for writing this
strategy.
 Since all long as well as short positions are of ATM in all the months &
straddles can be very effective for this company because of majority of
ATM Options in the contracts.
 Since Straddle is the strategy where, there can be volatility expected but
also it is suggested because of some of the deviations in both the

86
positions & being a low cost strategy it can help the traders in a good
way. The volatility is covered by using this strategy.

87
15. Company: DLF
1-Month

0.279 0.399087 0.2 0.00028
10-Dec-07 0.411 -0.5 12.35 0.00006
11-Dec-07 0.412 -0.5 12.75 0.00006
12-Dec-07 0.268 -0.5 6.85 0.00022
13-Dec-07 0.200 -0.49997 4.75 0.00036
14-Dec-07 0.132 -0.46585 2.35 0.00083
17-Dec-07 0.500 -0.5 78.75 0.00000
18-Dec-07 0.158 -0.5 5.65 0.00044
19-Dec-07 0.259 -0.49959 4.2 0.00053
20-Dec-07 0.234 -0.5 9.5 0.00026
24-Dec-07 0.162 -0.5 9.75 0.00043
26-Dec-07 0.371 -0.5 42.9 0.00009
27-Dec-07 0.031 -0.49997 4.15 0.00181
28-Dec-07 0.500 -0.5 55.05 0.00000
31-Dec-07 0.401 -0.5 8.1 0.00007
1-Jan-08 0.222 -0.46199 2.65 0.00041
2-Jan-08 0.466 -0.5 12.6 0.00002
3-Jan-08 0.354 -0.5 6.95 0.00011
4-Jan-08 0.499 -0.5 21.65 0.00000
7-Jan-08 0.499 -0.5 24.65 0.00000
8-Jan-08 0.451 -0.5 12.55 0.00003
9-Jan-08 0.495 -0.5 20.6 0.00000
10-Jan-08 0.500 -0.5 27.6 0.00000
11-Jan-08 0.500 -0.5 51.25 0.00000
14-Jan-08 0.437 -0.5 13.6 0.00003
15-Jan-08 0.499 -0.5 30.3 0.00000
16-Jan-08 0.500 -0.5 51.7 0.00000
17-Jan-08 0.500 -0.5 42.35 0.00000
18-Jan-08 0.500 -0.5 77.4 0.00000
21-Jan-08 0.500 -0.5 104.2 0.00000
22-Jan-08 0.497 -0.5 34.85 0.00000
23-Jan-08 0.500 -0.5 48.5 0.00000
24-Jan-08 0.460 -0.5 24.5 0.00003
25-Jan-08 0.500 -0.5 52 0.00000
28-Jan-08 0.489 -0.5 51.3 0.00001
29-Jan-08 0.123 -0.5 8.05 0.00072
30-Jan-08 0.175 -0.5 22.7 0.00035
31-Jan-08 0.396 -0.5 51.35 0.00008
1-Feb-08 0.223 -0.49971 4.3 0.00035
4-Feb-08 0.500 -0.5 70.6 0.00000
5-Feb-08 0.283 -0.5 5.9 0.00023
6-Feb-08 0.492 -0.5 20.3 0.00000
7-Feb-08 0.497 -0.5 23.3 0.00000
8-Feb-08 0.500 -0.5 29.7 0.00000
11-Feb-08 0.494 -0.5 23.2 0.00000

88
12-Feb-08 0.232 0.147805 0.45 0.00440
13-Feb-08 0.486 -0.5 21.6 0.00001
14-Feb-08 0.500 -0.5 51.25 0.00000
15-Feb-08 0.434 -0.5 15.4 0.00005
18-Feb-08 0.460 -0.5 20.7 0.00003
19-Feb-08 0.358 -0.5 15.5 0.00011
20-Feb-08 0.488 -0.5 30.15 0.00001
21-Feb-08 0.425 -0.5 20.5 0.00006
22-Feb-08 0.136 -0.49925 3.65 0.00096
25-Feb-08 0.167 -0.48336 2.65 0.00181
26-Feb-08 0.494 0.490701 0.25 0.00105
27-Feb-08 0.115 -0.5 7.95 0.00111
28-Feb-08 0.239 -0.5 24.3 0.00032
29-Feb-08 0.498 -0.5 21.75 0.00000
3-Mar-08 0.500 -0.5 67.3 0.00000
4-Mar-08 0.500 -0.5 36.55 0.00000
5-Mar-08 0.219 -0.49996 4.75 0.00042
7-Mar-08 0.496 -0.5 23.6 0.00000
10-Mar-08 0.485 -0.5 21.1 0.00001
11-Mar-08 0.500 -0.5 71.3 0.00000
12-Mar-08 0.500 -0.5 36.6 0.00000
13-Mar-08 0.500 -0.5 107.15 0.00000
14-Mar-08 0.500 -0.5 47.35 0.00000
17-Mar-08 0.500 -0.5 45.75 0.00000
18-Mar-08 0.484 -0.5 27.85 0.00001
19-Mar-08 0.179 -0.5 8.85 0.00044
24-Mar-08 0.400 -0.5 29 0.00011
25-Mar-08 0.498 -0.5 78.6 0.00000
26-Mar-08 0.168 -0.5 16.5 0.00064
27-Mar-08 0.166 -0.5 15.15 0.00068
28-Mar-08 0.498 -0.5 20.9 0.00000
31-Mar-08 0.500 -0.5 50.25 0.00000
1-Apr-08 0.491 -0.5 18.8 0.00001
2-Apr-08 0.316 -0.5 7.4 0.00024
3-Apr-08 0.188 -0.49969 4.15 0.00057

89
15.2. 2-month

0.279 0.399087 0.2 0.000279
10-Dec-07 0.492 -0.5 12.35 4.52E-06
11-Dec-07 0.493 -0.5 12.75 3.99E-06
12-Dec-07 0.422 -0.5 6.85 5.64E-05
13-Dec-07 0.363 -0.4995 4.75 0.000123
14-Dec-07 0.309 -0.36723 2.35 0.000313
17-Dec-07 0.500 -0.5 78.75 4.17E-47
18-Dec-07 0.369 -0.49999 5.65 0.000115
19-Dec-07 0.319 -0.49839 4.2 0.000192
20-Dec-07 0.455 -0.5 9.5 3.04E-05
24-Dec-07 0.453 -0.5 9.75 3.23E-05
26-Dec-07 0.500 -0.5 42.9 3.43E-15
27-Dec-07 0.318 -0.49832 4.15 0.000203
28-Dec-07 0.500 -0.5 55.05 9.42E-21
31-Dec-07 0.402 -0.5 8.1 6.8E-05
1-Jan-08 0.307 -0.41622 2.65 0.00024
2-Jan-08 0.495 -0.5 12.6 2.6E-06
3-Jan-08 0.434 -0.5 6.95 4.27E-05
4-Jan-08 0.500 -0.5 21.65 4.34E-09
7-Jan-08 0.500 -0.5 24.65 6.16E-10
8-Jan-08 0.493 -0.5 12.55 3.84E-06
9-Jan-08 0.500 -0.5 20.6 2.52E-08
10-Jan-08 0.500 -0.5 27.6 9.15E-11
11-Jan-08 0.500 -0.5 51.25 2.56E-24
14-Jan-08 0.493 -0.5 13.6 3.19E-06
15-Jan-08 0.500 -0.5 30.3 2.57E-11
16-Jan-08 0.500 -0.5 51.7 1.35E-22
17-Jan-08 0.500 -0.5 42.35 1.38E-16
18-Jan-08 0.500 -0.5 77.4 4.28E-42
21-Jan-08 0.500 -0.5 104.2 6.5E-67
22-Jan-08 0.500 -0.5 34.85 1E-11
23-Jan-08 0.500 -0.5 48.5 8.28E-18
24-Jan-08 0.500 -0.5 24.5 5.06E-08
25-Jan-08 0.500 -0.5 52 6.35E-19
28-Jan-08 0.500 -0.5 51.3 2.46E-17
29-Jan-08 0.450 -0.5 8.05 3.69E-05
30-Jan-08 0.500 -0.5 22.7 2.49E-09
31-Jan-08 0.500 -0.5 51.35 6.44E-27
1-Feb-08 0.327 -0.49852 4.3 0.00019
4-Feb-08 0.500 -0.5 70.6 1.31E-42
5-Feb-08 0.384 -0.49999 5.9 0.000102
6-Feb-08 0.500 -0.5 20.3 7.81E-08
7-Feb-08 0.500 -0.5 23.3 1.01E-08
8-Feb-08 0.500 -0.5 29.7 4.85E-11
11-Feb-08 0.500 -0.5 23.2 2.63E-08
12-Feb-08 -0.466 -0.47383 0.45 0.000618

90
13-Feb-08 0.500 -0.5 21.6 1.1E-07
14-Feb-08 0.500 -0.5 51.25 7.13E-21
15-Feb-08 0.493 -0.5 15.4 4.17E-06
18-Feb-08 0.499 -0.5 20.7 4.25E-07
19-Feb-08 0.491 -0.5 15.5 6.23E-06
20-Feb-08 0.500 -0.5 30.15 1.57E-09
21-Feb-08 0.499 -0.5 20.5 7.63E-07
22-Feb-08 0.107 -0.49898 3.65 0.000428
25-Feb-08 -0.009 -0.49159 2.65 0.00064
26-Feb-08 -0.500 -0.49999 0.25 7.48E-07
27-Feb-08 0.344 -0.5 7.95 0.000134
28-Feb-08 0.499 -0.5 24.3 4.37E-07
29-Feb-08 0.500 -0.5 21.75 8.5E-09
3-Mar-08 0.500 -0.5 67.3 1.92E-40
4-Mar-08 0.500 -0.5 36.55 2.87E-15
5-Mar-08 0.341 -0.49964 4.75 0.000202
7-Mar-08 0.500 -0.5 23.6 8.1E-09
10-Mar-08 0.500 -0.5 21.1 9.38E-08
11-Mar-08 0.500 -0.5 71.3 1.24E-38
12-Mar-08 0.500 -0.5 36.6 1.26E-13
13-Mar-08 0.500 -0.5 107.15 3.27E-77
14-Mar-08 0.500 -0.5 47.35 8.95E-19
17-Mar-08 0.500 -0.5 45.75 6.26E-17
18-Mar-08 0.500 -0.5 27.85 4.25E-09
19-Mar-08 0.403 -0.5 8.85 9.86E-05
24-Mar-08 0.500 -0.5 29 1.01E-08
25-Mar-08 0.500 -0.5 78.6 7.75E-33
26-Mar-08 0.489 -0.5 16.5 9.59E-06
27-Mar-08 0.479 -0.5 15.15 1.76E-05
28-Mar-08 0.497 -0.5 20.9 1.98E-06
31-Mar-08 0.500 -0.5 50.25 5.4E-14
1-Apr-08 0.500 -0.5 18.8 8.15E-08
2-Apr-08 0.418 -0.5 7.4 8.25E-05
3-Apr-08 0.251 -0.49894 4.15 0.000306

91
15.3. 3-Month

0.279 0.399087 0.2 0.000279
10-Dec-07 0.498 -0.5 12.35 8.69E-07
11-Dec-07 0.499 -0.5 12.75 6.94E-07
12-Dec-07 0.454 -0.5 6.85 2.98E-05
13-Dec-07 0.393 -0.49885 4.75 8.25E-05
14-Dec-07 0.300 -0.3539 2.35 0.000256
17-Dec-07 0.500 -0.5 78.75 5.01E-73
18-Dec-07 0.410 -0.49994 5.65 6.81E-05
19-Dec-07 0.328 -0.49753 4.2 0.000144
20-Dec-07 0.484 -0.5 9.5 1.02E-05
24-Dec-07 0.483 -0.5 9.75 1.03E-05
26-Dec-07 0.500 -0.5 42.9 5.73E-23
27-Dec-07 0.345 -0.49674 4.15 0.000137
28-Dec-07 0.500 -0.5 55.05 1.6E-33
31-Dec-07 0.452 -0.5 8.1 2.83E-05
1-Jan-08 0.274 -0.42133 2.65 0.000218
2-Jan-08 0.499 -0.5 12.6 5.31E-07
3-Jan-08 0.459 -0.5 6.95 2.43E-05
4-Jan-08 0.500 -0.5 21.65 4.94E-11
7-Jan-08 0.500 -0.5 24.65 1.54E-12
8-Jan-08 0.499 -0.5 12.55 7.19E-07
9-Jan-08 0.500 -0.5 20.6 3.64E-10
10-Jan-08 0.500 -0.5 27.6 4.49E-14
11-Jan-08 0.500 -0.5 51.25 2.47E-35
14-Jan-08 0.499 -0.5 13.6 4.88E-07
15-Jan-08 0.500 -0.5 30.3 3.13E-15
16-Jan-08 0.500 -0.5 51.7 8.11E-34
17-Jan-08 0.500 -0.5 42.35 3.77E-24
18-Jan-08 0.500 -0.5 77.4 3.68E-67
21-Jan-08 0.500 -0.5 104.2 2.6E-112
22-Jan-08 0.500 -0.5 34.85 5.54E-17
23-Jan-08 0.500 -0.5 48.5 7.86E-28
24-Jan-08 0.500 -0.5 24.5 9.2E-11
25-Jan-08 0.500 -0.5 52 1.99E-30
28-Jan-08 0.500 -0.5 51.3 1.55E-28
29-Jan-08 0.453 -0.5 8.05 3.49E-05
30-Jan-08 0.500 -0.5 22.7 1.92E-09
31-Jan-08 0.500 -0.5 51.35 2.4E-27
1-Feb-08 0.378 -0.49606 4.3 0.000121
4-Feb-08 0.500 -0.5 70.6 5.62E-65
5-Feb-08 0.433 -0.49996 5.9 5.32E-05
6-Feb-08 0.500 -0.5 20.3 6.91E-10
7-Feb-08 0.500 -0.5 23.3 2.31E-11
8-Feb-08 0.500 -0.5 29.7 3.45E-15
11-Feb-08 0.500 -0.5 23.2 6.32E-11
12-Feb-08 0.401 0.399736 0.45 0.001101

92
13-Feb-08 0.500 -0.5 21.6 5.33E-10
14-Feb-08 0.500 -0.5 51.25 8.8E-33
15-Feb-08 0.500 -0.5 15.4 2.16E-07
18-Feb-08 0.500 -0.5 20.7 2.89E-09
19-Feb-08 0.500 -0.5 15.5 3.06E-07
20-Feb-08 0.500 -0.5 30.15 7.83E-14
21-Feb-08 0.500 -0.5 20.5 5.81E-09
22-Feb-08 0.314 -0.49053 3.65 0.000214
25-Feb-08 0.266 -0.4361 2.65 0.000345
26-Feb-08 0.481 0.487096 0.25 0.000551
27-Feb-08 0.441 -0.5 7.95 4.51E-05
28-Feb-08 0.500 -0.5 24.3 5.52E-10
29-Feb-08 0.500 -0.5 21.75 6.83E-09
3-Mar-08 0.500 -0.5 67.3 3.54E-64
4-Mar-08 0.500 -0.5 36.55 2.77E-22
5-Mar-08 0.361 -0.49928 4.75 0.000142
7-Mar-08 0.500 -0.5 23.6 7.88E-12
10-Mar-08 0.500 -0.5 21.1 3.08E-10
11-Mar-08 0.500 -0.5 71.3 3.43E-65
12-Mar-08 0.500 -0.5 36.6 1.04E-20
13-Mar-08 0.500 -0.5 107.15 5.2E-137
14-Mar-08 0.500 -0.5 47.35 1.42E-30
17-Mar-08 0.500 -0.5 45.75 5.95E-28
18-Mar-08 0.500 -0.5 27.85 2.28E-13
19-Mar-08 0.477 -0.5 8.85 2.22E-05
24-Mar-08 0.500 -0.5 29 3.89E-13
25-Mar-08 0.500 -0.5 78.6 4.28E-65
26-Mar-08 0.500 -0.5 16.5 2.76E-07
27-Mar-08 0.499 -0.5 15.15 8.2E-07
28-Mar-08 0.500 -0.5 20.9 7.52E-09
31-Mar-08 0.500 -0.5 50.25 2.71E-27
1-Apr-08 0.500 -0.5 18.8 9.79E-08
2-Apr-08 0.400 -0.5 7.4 9.69E-05
3-Apr-08 0.188 -0.49946 4.15 0.000349

93
1-Month Call
0.6
0.5
0.4
0.3 Series1
0.2
0.1
0
0 5 10 15 20 25 30 35 40
1-Month Put
0.6
0.4
0.2
0 Series1
0 10 20 30 40 50 60 70
-0.2
-0.4
-0.6

94
2-Month Call
0.6
0.4
0.2
0 Series1
0 10 20 30 40 50 60 70
-0.2
-0.4
-0.6
2-Month Put
0
0 10 20 30 40 50 60 70
-0.1
-0.2
-0.3 Series1
-0.4
-0.5
-0.6

95
3-Month call
0.6
0.5
0.4
0.3 Series1
0.2
0.1
0
0 20 40 60 80 100
3-month put
0.6
0.4
0.2
0 Series1
0 20 40 60 80 100
-0.2
-0.4
-0.6

96
15.2. Analysis :
1-Month
A combo of all options has been showcased in this company scrip & it is
behaving very consistently, so as said from all the previous analysis it is quiet
consistent in all the way.
2-Month
A cluster has been formed in the graph wherein it is representing or the data is
ranging between 0.3 & 0.6, this is sharply moving to 0.4 to 0.5 which is a clear
indication of effective hedging. This can also be said as one of the risk free
investment.
3-Month
15.2.2. Put Options
1-Month
The trend of 1 month option is not at all expected here, because according to
the analysis done it is the only company which is not at all volatile & is
behaving as one of the effective hedging tool for the traders, we can see from
the graph that the line is moving at the rate of -0.5. so traders gear up for this
one which has no intentions of causing harm.
2 & 3 Month
Absolute consistency has been maintained in both month contracts, as the
option is nearing its expiry date the delta has maintained the same line i.e in the
range of +0.4 to +0.6 in case of call options & -0.4 to -0.6 in case of put
options . So a risk less strategy can be considered for this company.

97
15.2.3 Gamma
Gamma is highest for this company as compared to the other companies which
tells that the value of the option goes on increasing as the price of the option
goes on increasing & another interpretation we can make from this is the pace
of change in the delta is fast because of highest gammas.
15.3 Strategies for DLF

 Covered call is one of the suitable strategy suggested again because of
no risk involved or consistency maintained in the delta by hedging
effectively.
 Another strategy suggested for this company scrip is strangles because,
some of the options are running OTM & in these kind of strategies it
works out very well & as compared to the other companies, gamma is
highest for this company so this is one of the recommendable strategy
highest gammas.

98
16. Limitations of the study.
1. The period considered for research is one of the limitations in this
project.
2. Only 2 Option greeks are used for calculation of Risk-Return
Dynamics because of time limitation.

99
17. Bibliography
1. www.investopedia.com
2. www.wikipedia.com
3. www.nseindia.com
4. www.businessline.com
5. www.economictimes.com
6. www.icfaipress.com
Reference Books
7. Financial Derivatives by SSS Kumar
8. Futures & Options by Vohra & Bagri
9. NCFM Module

100

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1.

The growth of these markets has led to increasing involvement by institutions,

K.L.E Society’s Institute of Management Studies & Research, Hubli

K.L.E Society’s Institute of Management Studies & Research, Hubli

K.L.E Society’s Institute of Management Studies & Research, Hubli

The Bangalore Stock Exchange Limited (BgSE) is a self regulatory

K.L.E Society’s Institute of Management Studies & Research, Hubli

2.1.3 Investor Services Centre

To enable the investors at other places to have access to various services,

K.L.E Society’s Institute of Management Studies & Research, Hubli

In addition, information on over 4000 companies is available in the Corporate

2.1.5 Investment Education Centre

K.L.E Society’s Institute of Management Studies & Research, Hubli

K.L.E Society’s Institute of Management Studies & Research, Hubli

2.2.2 Depository Participant (DP) Services

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Quicker Settlement: Having trading arrangements with the broking

Network : An ever increasing network of service points brings BgSE Financial

Technology: State-of-art-technology has been implemented to provide better

Registrar & Share Transfer Agent

K.L.E Society’s Institute of Management Studies & Research, Hubli

Chairman Justice R Jayasimha Babu

K.L.E Society’s Institute of Management Studies & Research, Hubli

3.1.1 Indiabulls Financial Services Ltd is listed on the National Stock

3.2 Way 2 Wealth

K.L.E Society’s Institute of Management Studies & Research, Hubli

the mission “to be the pre-eminent destination for personalized financial

solutions helping individuals create wealth”.

The Venture Capital division came to be known as Global Technology

3.3 ASIT C MEHTA

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• Equity Market Trade Execution Service:-Membership of the National

K.L.E Society’s Institute of Management Studies & Research, Hubli

3.4 Motilal Oswal

Motilal Oswal Financial Services Ltd., consists of four companies.

3.4.1 Motilal Oswal Securities Ltd. (MOSt) is a leading research and

K.L.E Society’s Institute of Management Studies & Research, Hubli

K.L.E Society’s Institute of Management Studies & Research, Hubli

(DP Collection Centre)

K.L.E Society’s Institute of Management Studies & Research, Hubli

K.L.E Society’s Institute of Management Studies & Research, Hubli

K.L.E Society’s Institute of Management Studies & Research, Hubli

The proposed research would focus on the sources of economic efficiency

K.L.E Society’s Institute of Management Studies & Research, Hubli

K.L.E Society’s Institute of Management Studies & Research, Hubli

K.L.E Society’s Institute of Management Studies & Research, Hubli

 As the number of traders in the derivative segment are very less as

K.L.E Society’s Institute of Management Studies & Research, Hubli

K.L.E Society’s Institute of Management Studies & Research, Hubli

As an example, take a look at what happens to the price of tomatoes in the

K.L.E Society’s Institute of Management Studies & Research, Hubli

8.3 CME (Chicago Mercantile Exchange)

K.L.E Society’s Institute of Management Studies & Research, Hubli

8.4 Futures Contracts

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9.2 Bear Market

9.3 Going Long

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K.L.E Society’s Institute of Management Studies & Research, Hubli

9.8 Long Hedge

9.9 Short Hedge

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K.L.E Society’s Institute of Management Studies & Research, Hubli