praveen.bhatiya

Banknifty June Future is trading at 70 point discount

NSE:BANKNIFTY   NIFTY BANK
Bank nifty future June expiry trading at a lesser price as compare to may expiry. We can get benefited from this?

Bank nifty future 29th June 2017 expiry@22270 and 25th May 2017 expiry@23340 is having an arbitrage value of 70 point or 2800 in money term.
Reason 1: This indicates the short term the market demand is more as compare to the long term.
Reason 2: Long in banking stock is hedged with the index short.
Reason 3: Since few banking heavy weight not declared the result anticipating the higher volatility over hedging happened.
Reason 4: FOMC meeting outcome expectation hence over hedging.

Option strategy: This action is temporary and will not stay longer.

What kind of strategy one can form?
a. Buy 22500 call and put of 25th May 2017 expiry and sell 22000 put and 23000 call option of 29 June expiry each one lot. Excellent risk reward. Book profit either at 22000 or 22900 spot level.
b. Buy Future June one lot, 22500 put may 25th expiry one lot, sell 23000 call June 29th expiry one lot. Book loss if price fall below 21800 profit above 22900.

Comments

Sir really didn't understand your A strategy. Can you please explain it?
Reply
@ms555, The strategy has no name like butterfly etc. just used the instruments to cater the need of unusual situation where June Future was trading on 70 point discount comparing to the current month.
Reply
ms555 praveen.bhatiya
@praveen.bhatiya, Sir i just want to understand how this strategy will work and how it will turn profitable?
Reply
Even the vix is so low. LEAPS would have been great idea here. Too bad not traded in India.
Reply
praveen.bhatiya inderjeet05
@inderjeet05, LEAPS is not available but one can make other appropriate strategies for this kind of situation.
Reply
inderjeet05 praveen.bhatiya
@praveen.bhatiya, Sure, excellent post
Reply
Very nice info, highly appreciable one :)
Reply
@InsiderB, Thanks sir I am great admirer of your analysis, sincerely appreciate your work.
Reply
InsiderB praveen.bhatiya
@praveen.bhatiya, Thank you, I'm glad that you like My analysis. All the Best :)
Reply
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