Ratio Spread with Calls- Creating a Zero Downside Risk Strategy in Stock Market

There is a general perception that whenever a Stock goes down, traders in that stock are doomed. This was probably true before 2001, when derivatives were not introduced in the Indian Stock Markets. Nowadays, there are many strategies available in the derivatives segment, which either make huge amou...

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Bibliographic Details
Published inActa Universitatis Danubius. Œconomica Vol. 8; no. 2; pp. 48 - 60
Main Author Vashisht, Priyanka
Format Journal Article
LanguageEnglish
Published Danubius University Press 2012
Editura Universitară Danubius
Subjects
Economy
Options
Zero Downside Risk
Nifty
Ratio Spread with Calls (1x2)
Systematic Trading Plan
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Summary:There is a general perception that whenever a Stock goes down, traders in that stock are doomed. This was probably true before 2001, when derivatives were not introduced in the Indian Stock Markets. Nowadays, there are many strategies available in the derivatives segment, which either make huge amounts of money for the traders whenever the market goes down, or there is Zero risk on the downside. One such strategy in options segment of derivatives is Ratio spread with Calls.This strategy has Zero Risk on the downside (with chosen strike prices and entry time), and if the Market is mildly bullish, profits can also be made on the upside. This Research paper examines the results of Ratio spread with Calls as applied on Nifty in 42 monthly FO series, with the aim to create a Zero Downside Risk Strategy which can be easily understood by even a beginner in Stock Market.
ISSN:2065-0175
2067-340X