Derivatives Assignment:

Role of the Market Participant: Speculator

Name of the Strategy: Bull Call Spread

Buying Lower strike Call, Sell Higher Strike Call

Date of Execution: 27th January 2022

Underlying Stock: Bharti Airtel

Underlying Option Contract:

Strike Price: Rs. 27.10 @ 710
Expiry Date:  24th February 2022
Market Lot Size: 950
Number of Lots Purchased: 17
% of Portfolio: 43.57%

Underlying Option Contract:

Strike Price: Rs. 14.45 @ 740
Expiry Date:  24th February 2022
Market Lot Size: 950
Number of Lots Purchased: 32
% Of Portfolio: 43.928%

Margin left: Rs 1,30,000

Background:
Bharti Airtel Limited, also known as Airtel, is an Indian multinational telecommunications services
company based in New Delhi, India. It operates in 18 countries across South Asia and Africa.

It listed at a price of Rs. 16 and its current market price is Rs.678. It is the second biggest telecom service
provider among other things.

The bull case for Bharti Airtel

1. $1B investment by Google in Bharti Airtel.

2. Government relief package for AGR payments
3. Continued gain of market share from Vodafone Idea and the subsequent government
stake in Vodafone which puts corporate governance at risk.
4. Hiking of tariff pricing by all players in the telecom sector which should boost
revenues
 ₹ 600,000.00
Performance comparison
₹ 400,000.00

₹ 200,000.00

₹ 0.00
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

-₹ 200,000.00

-₹ 400,000.00

-₹ 600,000.00

-₹ 800,000.00

-₹ 1,000,000.00
Daily Gain or Loss for Long Call
-₹ 1,200,000.00 Combined Daily Net Profit & Loss for Hedged Porfolio
Daily Gain or Loss for Short Call

Conclusion:
The bull call spread strategy is used when someone is positive about a stock but also wants to protect
himself/ herself from the downside. As you can see from the graph, a person invested in naked calls
performs better during a bull run but worse during a bear run. In this case our client will lose all their
money in naked call options but if they were to use the bull call spread, they would still have 10% of
their portfolio intact