F&O analysts suggest put ratio spread on RIL

The maximum downside loss could be unlimited if RIL trades below Rs 1,543, 18 per cent lower from Monday’s closing, an unlikely event.

Synopsis

The RIL 1,900 put closed at Rs 103 a share (505 shares make a lot) while the 1,700 put closed at Rs 30. Using these rates, the sale of two OTM puts fetches the client Rs 60, which cuts her outflow to Rs 43. This is the maximum a client would lose if RIL trades consistently above Rs 1,900.

Mumbai: Expecting a gradual decline in volatility and price stability around Rs 1,750-1,800 on RIL, some analysts are advising their rich clients to initiate a put ratio spread on the stock’s options to play for 5-7 per cent more downside. The strategy is to buy a 1,900 in-the-money put, while selling two 1,700 out-of-the-money puts to reduce the outflow. All options expire on November 26. The RIL share closed down 8.7 per cent at Rs 1,876 after
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