We have request from Sudhin for recommending a covered call position for Him to recoup his losses.. Let me try and build one for him....

Some Basic Assumptions

1. Sudhin Has 100 (one lot) of Infy shares

2. He is in position to pledge his holding and take a traing limit against this (like the one given by ICICI Direct / Kotak Securities and othe brokers...

3. This strategy is being discussed for education purpose... When i look at my charts, i get feling that Infosys may bounce within short time and this may not be correct time to write calls

Time 12.05 Infy Spot at 1828

Sudhin Should sell 2 lots of Infy Sept Calls of 1890 Strike price. Total limit required for selling these calls would be approx Rs 100000, which will come from limit released by his holding..

The resultant Payoff diagram may look like the one in the chart..

Sudhin will get to pocket Rs 3380 as premium as long as Infy does not close above 1890. He also gets to keep whatever stock appreciation that happens. Beyond 1890 spot, the call premium will start eating into the gain he makes on his portfolio holding.

He can still keep holding position till Nifty spot of 1980, beyond which he will start losing Money (seems distinct possibility in current month)So the call premium will help him recover approx 1.75% of his loss at CMP in 15 days.. (not a bad deal)..

Please give me your comments