What would be the different scenarios of net P/L for this Covered Call strategy with Nifty futures?

General
1

Hi All,

At present, I am holding the below covered call position:

2 lots of Nifty May future long @ 8370

1 lot of Nifty 8100CE short @ 142.30

1 lot of Nifty 8200CE short @ 167.25

Please help me to understand the below:

What will be the net P/L at various levels of Nifty expiry (For ex- 8100/8200/8370/8500)?

What would be maximum profit/loss and at what level of Nifty expiry?

In general, is it advisable to hold a position till expiry or shall we close the positions at once?

How my P/L will be calculated if I let the position expire?

Thanking in anticipation!!

Mangesh

2

What you have mentioned is not really a covered call position. Covered call is when you enter all the positions at the same time. Looking at your position it looks as if you had short calls, and when it started going up you went long Nifty futures.

In such situations it is wiser to book the loss rather than complicating the situation.

The breakdown point(point at which you make loss, strike + premium at which you short) for 8100 short calls is 8242 and 8200 call is 8367. So say average being 8304.

Since you are long Nifty futures at 8370, every 1 point Nifty goes up, you will loose 1 point on nifty short calls. So no profit no loss.

Every point that Nifty goes below 8304, you will earn 1 point from short calls, but you will loose 1 point on Nifty futures. So no profit/no loss.

If Nifty is between 8304 to 8370, you will loose money. So if Nifty expires at 8350, you will loose 46 points (4650 = Rs 2300) in short calls and you will loose 20 points or Rs 1000 (2050)on long futures. Together Rs 3300 points.

So above 8370 no profit no loss.

Below 8304 no profit no loss.

Between 8304 and 8370 - Loss of Rs 3300.

1 Like
3

Hi All,
I have taken a perfect covered call position this month.
2 lots of Nifty June future long @ 8129.70
2 lots of Nifty 8100CE short @ 150.95
Please help me to understand the below:
What will be the net P/L at various levels of Nifty expiry (For ex- 7900/8000/8100/8200)?
What would be maximum profit/loss and at what level of Nifty expiry?
In general, is it advisable to hold a position till expiry or shall we close the positions at once?
How my P/L will be calculated if I let the position expire (any overhead charges to let this postion expire)?
Thanking in anticipation!!
Mangesh

4

Thanks for the answer Nithin!