MBA PROGRAMME

SCHOOL OF BUSINESS AND MANAGEMENT

CHRIST (DEEMED TO BE UNIVERSITY), BANGALORE

CIA III

TITLE: EXCEL BASED TOOL FOR DERIVATIVES

Submission date 14th September 2021

Under the Guidance of

PROF ANIRUDDHA OAK

Submitted By

NAME REGISTRATION NO.

RESHMA MENON 2027153

S ASHHAR JAMIL 2027260

SONIA SINGH 2027439

Introduction
For this assignment we talked to Mr. Yash Sevkani, He works as an Area Manager at
Tradebulls Securities Pvt Ltd. He lives in Mumbai and is passionate about trading. He has
been involved in derivative trading since the last 4 years. So, upon asking about his positions
this is what he told us.
Mr. Sevkani expects the Nifty Bank index to fall in the next 10-15 days. By his analysis the
Index is reaching its resistance and will be falling there on. Currently the Bank Nifty is at Rs
36600
But he expects it to go below 35000 marks. With this view in mind a bear spread strategy is
suggested. He can buy 1 lot of September 30 put option at the strike price of Rs 36000 for the
price of Rs 253/share and he will sell 1 lot of September 30 put option at the strike price of
Rs 35000 for the price of Rs 86/ share.

Model
Assumptions
1. All strikes belong to the same underlying
2. Belong to the same expiry series
3. Each leg involves the same number of options

Data Source
NSE website

BULL-SPREAD
The above graph depicts the Bull Spread by buying a Call at a strike price of 600 and selling
a Call at a strike price of 650. The underlying for both the options is the Indian Energy
Exchange (IEX) index.
We see that the for a lot size of 1250, the maximum profit
potential is of Rs. 46,750 and the maximum loss potential
is Rs. 15,750.
The Net premium is an inflow of Rs. 15,750. The investor
view is bullish.

BEAR-SPREAD

The above graph depicts the Bear Spread by buying and selling put options for underlying –
Nifty Bank Index.
We see that for a lot size of 25 and expected spot price of Rs. 35,500, the maximum profit
potential is unlimited and the maximum loss potential for the strategy is Rs.1,28,000. The
investor view is bearish.

STRANGLE STRATEGY

Assumptions:

1. The maximum loss is restricted to the net premium paid

2. The loss would be maximum between the two strike prices
3. Upper Breakeven point = Call strike + net premium paid
4. Lower Breakeven point = Put strike – net premium paid
5. Profit potentially is unlimited

The above graph depicts the Long Strangle strategy by buying call and put options for
underlying – Tata Steel stock.

We see that for lot size 850 and expected spot price of Rs. 1,450, the maximum profit
potential is unlimited (as assumed earlier) and the maximum loss potential is Rs.80,750.
The investor view is neutral bullish and on volatility.

STRADDLE STRATEGY

Assumptions:
1. With reference to the ATM strike, the strategy makes money in either direction
2. Maximum loss is experienced when markets don’t move and stay at ATM
3. Max loss = Net premium paid
4. There are two break evens – on either side, equidistant from ATM
5. Upper Breakeven = ATM + Net premium

The above graph depicts the Straddle spread using Long European Call and Short European
Put options for the underlying – ITC stock.

We see that for a lot size of 3200 and expected spot price of Rs. 280, the maximum profit
potential is unlimited and the maximum loss potential for the strategy is Rs.1,28,000.
The graph represents a v-shape. The investor view is neutral bullish and on volatility.
BUTTERFLY SPREAD

The above graph depicts the Butterfly spread using Long European Call and Short European
Call options for the underlying – Nifty 50 index.

We see that for a lot size of 3200 and expected spot price at expiry of Rs.17,400, the
maximum profit potential is Rs. 9,025 and the maximum loss potential for the strategy is
Rs.2,850. The investor view is neutral bearish and on volatility.

Recommendations
 Mr. Sevkani can explore futures trading with risk minimizing portfolio.
 Capture market imperfections through a simultaneous operation in two
markets
 Take advantage of market opportunities regardless of the trend
 In bearish market, it is suggested to opt for Put Option to minimize losses
 SEBI should take measures to improve awareness about the derivatives
market as several investors do not have much understanding about them