How to Find the Most Volatile Stocks?
What is Volatility? Volatility in the context of stock markets is the amount of price change which a stock experiences over a given period of time (i.e. breadth or the difference between high-low). Put differently, if the price stays relatively stable, the stock has low volatility. A highly volatile stock is one which moves randomly in […]
Draft Red Herring Prospectus (DRHP) and the IPO Procedure in India
I have long been convinced that not more than 0.1% of retail investors look at the (Draft Red Herring) Prospectus (the DRHP) before applying for shares in an IPO. As a lawyer (and an Attorney) who spent 6 years drafting these documents, this has never been a happy realisation. I wrote things which nobody liked to read. This […]
What is Algorithmic Trading
Before I begin – Remember that while algorithms can enable high frequency trading, the scope for algorithmic trading is much wider. While all high frequency trading will use some form of computer programming, all algorithms are not written to execute only high frequency trades. Algorithmic Trading Every buy/sell trade in the stock market is backed […]
Arbitrage Opportunity in Stock Markets – Making Risk Free Profits
Arbitrage involves buying and selling the same asset simultaneously across two different markets to profit from the price difference. In the stock markets, arbitrage opportunity exists across the cash (delivery) and the derivative (F&O) market. In the most basic form delivery positions can be hedged by having a counter position in the futures market**. The big […]
Put Backspread Option Strategy
When to use: Put Backspread Option Strategy is used when the investor is bearish on the stock (i.e. when the investor expects the stock price to fall in the near future). How it works: In the put backspread strategy the investor sells 1 in-the-money put option; and buys 2 out-of-the-money put options of the same underlying stock with the same expiry […]
Call Backspread Option Strategy
When to use: Call Backspread Option Strategy is used when the investor is bullish on the stock (i.e. the investor expects the price of the stock to rise in the near future). How it works: Call backspread option strategy uses three option contracts of the same underlying stock, with the same expiry date but two different strike prices. In […]
Short Synthetic Option Strategy
When to use: Short Synthetic Option Strategy is used when the investor is bearish on the stock in the near future (i.e. the investor expects the stock to fall in the near future). How it works: In a short synthetic option strategy you sell 1 call option and buy 1 put option of the same underlying stock with the same expiry […]
Strap Option Strategy
When to use: Strap option strategy is used when the investor is bullish on the stock and expects volatility in the near future. How it works: Strap option strategy uses three option contracts of the same underlying stock, with the same expiry date and same strike prices. In this strategy, you buy 2 at-the-money call options and 1 at-the-money put option, each […]
Short Put Ladder Option Strategy
When to use: Short Put Ladder Option Strategy is used when the investor is neutral to bullish on the stock and expects significant volatility. How it works: In the short put ladder strategy you sell 1 in-the-money put option; buy 1 at-the-money put option and buy 1 out-of-the-money put option of the same underlying stock with the same expiry date. You believe that the market will […]
Short Call Ladder Option Strategy
When to use: Short Call Ladder Strategy is used when the investor is moderately bullish on the stock and expects significant volatility. How it works: In the short call ladder strategy you sell 1 in-the-money call option; buy 1 at-the-money call option and buy 1 out-of-the-money call option of the same underlying stock with the same expiry date. You believe that the market will be […]