TCS

Hedging using Options:

1. If Client has to bought TCS options on Jan 3rd
(i) He had to buy 1150 call option and 1250 put option as the spot price on that day
was 1165.75
(ii) To make perfect Hedging
Pay off of 1150 call option on Jan 21ST = Spot Price-Strike Price-Call Premium
= 379.25-340-29.00
= 10.25
Pay off of 1250 put option on Jan 21ST = Strike Price-Spot Price-Put Premium
= 380-379.25-10.65
= -9.90
Hedge ratio = Call pay off / Put pay off
= 0.7/-4.3 = - 0.1
Hedge Ratio of -0.1 indicates perfect hedging using options.
(iii) If client exits on Last settlement day
The Pay off of 1150 call option on Jan 27th = Spot Price-Strike Price-Call Premium
= 1195.75-1150-48.5
= -2.725
Hence client will make a loss of -2.725per share.
The Pay off of 1250 put option on Jan 27th = Strike Price-Spot Price-Put Premium
= 1250-1195.78-65
= -10.775
Hence client will make loss of - 10.775 per share.
Net Obligation = (profit-loss) × Lot size
Investors incurres losses in both the cases.
AXIS ;

Hedging using Options:

1. If Client has to bought AXIS options on Jan 3rd
(i) He had to buy 1250 call option and 1350 put option as the spot price on that day
was 1357.15
(ii) To make perfect Hedging
Pay off of 1250 call option on Jan 25TH = Spot Price-Strike Price-Call Premium
= 1318.88-1250-45.9
= 22.975
Pay off of 1350 put option on Jan 25TH = Strike Price-Spot Price-Put Premium
= 1350-1318.88-55
= -23.875
Hedge ratio = Call pay off / Put pay off
= 22.975/-23.875 = - 0.96
Hedge Ratio of -0.96 indicates perfect hedging using options.
(iii) If client exits on Last settlement day
The Pay off of 1250 call option on Jan 27th = Spot Price-Strike Price-Call Premium
= 11306.5-1250-62
= -5.5
Hence client will make a loss of -2.725per share.
The Pay off of 1350 put option on Jan 27th = Strike Price-Spot Price-Put Premium
= 1250-1195.78-65
= -4.5
Hence client will make loss of - 4.5 per share.
Net Obligation = (profit-loss) × Lot size
Investors incurres losses in both the cases.
BAJAJ:

Hedging using Options:

1. If Client has to bought BAJAJ options on Jan 3rd
(i) He had to buy 1300 call option and 1400 put option as the spot price on that day
was 1517.33
(ii) To make perfect Hedging
Pay off of 1300 call option on Jan 27TH = Spot Price-Strike Price-Call Premium
= 1296.7-1300-0.45
= -3.75
Pay off of 1400 put option on Jan 27TH = Strike Price-Spot Price-Put Premium
= 1400-1296.7-90
= 13.3
Hedge ratio = Call pay off / Put pay off
= -3.75/13.3 = - 0.28
Hedge Ratio of -0.28 indicates perfect hedging using options.
(iii) If client exits on Last settlement day
The Pay off of 1250 call option on Jan 27th = Spot Price-Strike Price-Call Premium
= 1296.7-1300-0.45
= -3.75
Hence client will make a loss of 3.75per share.
The Pay off of 1350 put option on Jan 27th = Strike Price-Spot Price-Put Premium
= 1400-1296.7-90
= 13.3
Hence client will make loss of - 13.3 per share.
Net Obligation = (profit-loss) × Lot size
=13.3-3.75*250
=2387.5
Investors incurres profit 0f rs2387.5.
BHARTI ARTL

Hedging using Options:

1. If Client has to bought BHARTI ARTL options on Jan 3rd
(i) He had to buy 340 call option and 380 put option as the spot price on that day was
359.87.
(ii) To make perfect Hedging
Pay off of 340 call option on Jan 14TH = Spot Price-Strike Price-Call Premium
= 346.35-340-10.15
= -3.8
Pay off of 380 put option on Jan 14TH = Strike Price-Spot Price-Put Premium
= 380-346.35-30
= 3.65
Hedge ratio = Call pay off / Put pay off
= -3.8/3.65 = - 1.04
Hedge Ratio of -1.04 indicates perfect hedging using options.
(iii) If client exits on Last settlement day
The Pay off of 340 call option on Jan 27th = Spot Price-Strike Price-Call Premium
= 332.125-340-0.05
= -7.925
Hence client will make a loss of 7.925per share.
The Pay off of 380 put option on Jan 27th = Strike Price-Spot Price-Put Premium
= 380-332.125-30
= 17.875
Hence client will make profit of 17.875 per share.
Net Obligation = (profit-loss) × Lot size
=17.875-7.925*1000
=9950
Investors incurres profit 0f RS9950.
RANBAXY LABS

Hedging using Options:

1. If Client has to bought RANBAXY options on Jan 3rd
(i) He had to buy 540 call option and 580 put option as the spot price on that day was
600.82.
(ii) To make perfect Hedging
Pay off of 540 call option on Jan 5TH = Spot Price-Strike Price-Call Premium
= 603.25-540-31.2
= 32.05
Pay off of 380 put option on Jan 214TH = Strike Price-Spot Price-Put Premium
= 580-603.25-8.25
= -31.5
Hedge ratio = Call pay off / Put pay off
= 32.05/31.5 = 1.01
Hedge Ratio of 1.01 indicates perfect hedging using options.
(iii) If client exits on Last settlement day
The Pay off of 540 call option on Jan 27th = Spot Price-Strike Price-Call Premium
= 529.35-540-24.85
= -35.5
Hence client will make a loss of 35.5per share.
The Pay off of 580 put option on Jan 27th = Strike Price-Spot Price-Put Premium
= 580-529.35-27.95
= 22.7
Hence client will make profit of 17.875 per share.
Net Obligation = (profit-loss) × Lot size
=22.7-35.5*500
=-6400
Investors incurres loss 0f RS9950.