Buying Nifty call of nearest 100-multiple on first day of new series has been profitable

Operating profit is the amount realized from a business's ongoing operations. It serves as a highly accurate indicator of the business's potential profitability because it excludes all extra factors. Moneycontrol analysis showed there are 7 companies from the BSE universe that have given at least 15 percent operating profit growth in FY20 compared to the previous fiscal year (FY19). We considered only companies where FIIs and MFs, both, increased stake in the first two quarters of FY21. Interestingly, in FY21 so far, all of them have been trading in the green and have gained between 20 percent and 190 percent. (Data Source: ACE Equity)

With the Nifty having topped the 10,000-mark convincingly, bullish traders have now set their sights on the index having a free run for another 200-300 points.

The 50-share index has risen around 22 percent so far this calendar and the uptrend has been a fairly consistent one.

If you are among those who feel that the index still has steam left in it, buying a call option for a strike price at the nearest 100-point multiple early on in the new F&O series would be the best way to play the trade.

Moneycontrol analysed the seven F&O series in 2017 starting from January, which shows that the Nifty index has topped a 100-point multiple at least once in every series.

This interesting trend hindsight shows that if investor had bought out-of-the-money call option for strike price closest to the next 100 multiple of NIFTY level on the first day of the new series and sold it as soon as the option is at-the-money or near to that, he would have gained a minimum of 12 percent and maximum of 105 percent on that option. We did the back testing of this for the last seven F&O series.

For e.g. on the first day of January series, Nifty 8200 Call open price was Rs 86.95 (8200 call was considered as previous F&O series closed at 8103.60). Within the series Nifty first closed near 8200 mark on January 04, 2017 at 8190.50 level, on that day Nifty 8200 call premium was 110.60. This trade has given 27.20 percent return on one lot to the derivative trader.

Follow @riteshpresswala