Although most people,investors are attuned to buying every stock or any asset class in the hope of selling it later at higher price.taking into account historical prospective most of the investors are not right as there is cost of money involved in such things that they forget to factor in their calculations.
My study of nse nifty is based on such prevalent practices. And my findings based on study of last five years of nifty strategies and their performances are
1.You buy nifty every month for 60 month at start of every settlement cycle,you incur cost of carry (premium) of on an average Rs.30 every month.though nifty has risen approximately 3000 points during the period,minus your cost of carry(Rs.30*60 months) you end up earning only 1200 points that to at a greater risk as draw down can be huge sometime of 400 to 500 points
2.You sell nifty every month and wait for expiry,thereby earning cost of carry of rs 30 but due to nifty:rise of around 3000 points you are a loser that to at risk of huge draw-down every month
3.You buy nifty every month and sell a straddle and earn a premium of Rs.290. calculated depending on various implied volatility of different months.You earn 2600 points in sixty months after deducting 1800 points due to cost of carry for sixty months you earn 2600 points maximum draw-down is 392 points.
4.Best strategy although looks odd at first glance is selling nifty every month and selling straddle you earn approximately Rs.290( premium ) and Rs.30 on nifty premium(cost of carry).You earn Rs 4350 points in sixty months i.e Rs 217500(.4350*Rs 50) at maximum draw-down of 332 points.
Cost of initing strategy is approx Rs 50000/ this is good strategy for retail-investors having moderate risk profile.earning good money over a period of time.If you redeploy your earning your returns can be huge.
Strategy has been drawn on actual nifty settlement rates from June 2009 to June 2014. Actual values of vix has been used for arriving at straddle values.Cost of carry has been assumed on basis of average.Straddle for newbies is call and put of at the money strike price and draw down is maximum loss at a given point.
My study of nse nifty is based on such prevalent practices. And my findings based on study of last five years of nifty strategies and their performances are
1.You buy nifty every month for 60 month at start of every settlement cycle,you incur cost of carry (premium) of on an average Rs.30 every month.though nifty has risen approximately 3000 points during the period,minus your cost of carry(Rs.30*60 months) you end up earning only 1200 points that to at a greater risk as draw down can be huge sometime of 400 to 500 points
2.You sell nifty every month and wait for expiry,thereby earning cost of carry of rs 30 but due to nifty:rise of around 3000 points you are a loser that to at risk of huge draw-down every month
3.You buy nifty every month and sell a straddle and earn a premium of Rs.290. calculated depending on various implied volatility of different months.You earn 2600 points in sixty months after deducting 1800 points due to cost of carry for sixty months you earn 2600 points maximum draw-down is 392 points.
4.Best strategy although looks odd at first glance is selling nifty every month and selling straddle you earn approximately Rs.290( premium ) and Rs.30 on nifty premium(cost of carry).You earn Rs 4350 points in sixty months i.e Rs 217500(.4350*Rs 50) at maximum draw-down of 332 points.
Cost of initing strategy is approx Rs 50000/ this is good strategy for retail-investors having moderate risk profile.earning good money over a period of time.If you redeploy your earning your returns can be huge.
Strategy has been drawn on actual nifty settlement rates from June 2009 to June 2014. Actual values of vix has been used for arriving at straddle values.Cost of carry has been assumed on basis of average.Straddle for newbies is call and put of at the money strike price and draw down is maximum loss at a given point.
