STRADDLE: A short straddle is an options

strategy comprised of selling both a call option

and a put option with the same strike price and
expiration date. This strategy is used because
the stock was not having any significant
movement up/down side over the lives of the
options contracts. The maximum net payoff is
26.64 rupees at the spot price of 560.7 9 days
before the contract's expiration.

STRATEGY 1

STRANGLE: A short Strangle is an options strategy

comprised of selling two options used where a trader
would sell a call and put (i) both options must use the
same underlying stock Each option must have the same
expiration (ii) both call and put options are out of the
money This strategy is used because the stock was not
having any significant movement up/down side over
the lives of the options contracts. We have applied
Strangle strategy with call strike price 570 and Put
strike price at 560 which expired on 30th September 2021.
STRATEGY 2

PUT CALL PARITY: Using the put call parity we have calculated the synthetic call for the
options contract of Marico for period 25th September 2021 to 30th September 2021 with the
expiry date being 30 September 2021. Theoretically synthetic call must be equal to original call.
In the above graph the original Call price is plotted against the synthetic call price. We can see
that the synthetic call value is not equal to original call price which means there exists arbitrage
opportunities. The arbitrage opportunities have also been plotted in the graph. Based on the
situation an arbitrageur can either buy or sell either synthetic call or original call to get the profit.
The maximum arbitrage opportunity here is 7.204 rupees, which is not enough to cover the
transaction cost. The put-call parity relationship holds almost true in our case. However, there
are deviations observed over the period. This is not at all surprising as we are dealing with real
time market data. Some reasons for the deviations may be as follows:

• The risk-free rate is taken at 3.3937% for the entire period as we considered 90
days T-bill risk free rate.
• Perfect ATM contracts are hard to find as the spot moves in and around the
strike, which we assume to be ATM.
Due to the bullish run in the market, there was high deviation in the stock price. As a result of
which the stock was more volatile

VOLATILITY SMILE: A volatility smile is a common graph shape that results from plotting
the strike price and implied volatility of a graph of options with the same underlying asset and
expiration date. We Observed that the near or at the money strike price had the lowest implied
volatility, this is implied for both call and put options. In the adjacent graph we calculated the
volatility spread where the actively traded call strike price was from 500 from 580. We observed
that as strike prices increased that is moving Out of the money the implied volatility increased.

Company: Marico Pvt Ltd.

Analyst: Section A (Group 7) – Amarjeet Kunal(20A2HP427), Bhrigu Sud (20A1HP092),
Nishchay Miglani(20A1HP019), Harish Sandesh(20A2HP452)
Source: https://www1.nseindia.com/products/content/derivatives/equities/historical_fo.htm ,
https://www.rbi.org.in/ , https://www.nseindia.com/
Disclaimer: The entire analysis is an academic assignment and is the author’s opinion and
should not be constructed as a piece of investment advice. The author is not responsible for
any positions taken in the market based on the above analysis.