CEC

Financial Derivatives(4539222)
MBA SEM 3 | BATCH 2021-23
By:

Dhurvkumar Vanza (2110)

Vrajeshwari Yadav (2163)
Type Public
Traded as BSE: 532538
NSE: ULTRACEMCO
BSE SENSEX Constituent
NSE NIFTY 50 Constituent
Industry Cement
Founded 1983
Headquarters Mumbai, Maharashtra, India
Key people K.C.Jhanwar, Managing Director
Products Cement
Stock price: ULTRACEMCO (NSE) ₹7,270.10
16 Jan, 3:30 pm IST
Revenue  ₹53,106 crore (US$6.7 billion) (2022)
Operating income  ₹8,362 crore (US$1.0 billion)  (2022)
Net income  ₹7,332 crore (US$920 million) (2022)
Total assets  ₹83,827 crore (US$10 billion)  (2022)
Total equity  ₹50,435 crore (US$6.3 billion) (2022)
No. of employees 22,000
Parent Aditya Birla Group
Website
Naked Hedge
position Position
Option Trading
Strategy
Spread
Combination
Position
NAKED OR UNCOVERED POSITIONS
 1. NAKED LONG STOCK POSITION
• Share price on 19 Jan. is INR 7000 • Profit & Loss from naked long stock position
Stock Price
Date Gain/Loss
Naked Long Stock
Expiration
800 14-Jan 6500 -500
15-Jan 6600 -400
600
16-Jan 6700 -300
400
17-Jan 6800 -200
200 18-Jan 6900 -100
0
19-Jan 7000 0
6500 6600 6700 6800 6900 7000 7100 7200 7300 7400 7500 7600
20-Jan 7100 100
-200
21-Jan 7200 200
-400 22-Jan 7300 300
-600 23-Jan 7400 400
Gain/Loss 24-Jan 7500 500
25-Jan 7600 600
 2. NAKED SHORT STOCK POSITION

• Share price on 19 Jan. is INR 7000 • Profit & Loss from naked short stock position

Date Stock Price Expiration Gain/Loss

Naked Short Stock
14-Jan 6500 500
600
15-Jan 6600 400
400 16-Jan 6700 300
200 17-Jan 6800 200
18-Jan 6900 100
0
6500 6600 6700 6800 6900 7000 7100 7200 7300 7400 7500 7600 19-Jan 7000 0
-200 20-Jan 7100 -100
-400 21-Jan 7200 -200
22-Jan 7300 -300
-600
23-Jan 7400 -400
-800 24-Jan 7500 -500
Gain/Loss 25-Jan 7600 -600
 3. NAKED BOUGHT CALLS

Payoff from this = ( St – Sx ) – C (premium) • Profit & Loss from naked bought calls
Stock
• Exercise price of INR 7000 Date Price TV Of Call Call Price Paid Gain/Loss
• Price of call is INR 100 Expiration
14-Jan 6500 0 -100 -100
Naked Long Call 15-Jan 6600 0 -100 -100
600
16-Jan 6700 0 -100 -100
500 17-Jan 6800 0 -100 -100
400 18-Jan 6900 0 -100 -100
300 19-Jan 7000 0 -100 -100
20-Jan 7100 100 -100 0
200
21-Jan 7200 200 -100 100
100
22-Jan 7300 300 -100 200
0
6500 6600 6700 6800 6900 7000 7100 7200 7300 7400 7500 7600 23-Jan 7400 400 -100 300
-100 24-Jan 7500 500 -100 400
-200 25-Jan 7600 600 -100 500
Gain/Loss
 4. NAKED WRITTEN CALL
Payoff from this = C – (St –S0) if St > Sx • Profit & Loss from naked written call

Stock Price Call Price

Date TV Of Call Gain/Loss
Expiration Paid
Written Call 14-Jan 6500 0 100 100
200 15-Jan 6600 0 100 100
100 16-Jan 6700 0 100 100
0 17-Jan 6800 0 100 100
6500 6600 6700 6800 6900 7000 7100 7200 7300 7400 7500 7600
-100 18-Jan 6900 0 100 100
19-Jan 7000 0 100 100
-200
20-Jan 7100 -100 100 0
-300
21-Jan 7200 -200 100 -100
-400
22-Jan 7300 -300 100 -200
-500 23-Jan 7400 -400 100 -300
-600 24-Jan 7500 -500 100 -400
Gain/Loss 25-Jan 7600 -600 100 -500
 6. NAKED WRITTEN PUTS
Profit from this = - C (Sx –St) + p if St < Sx -C ; if St > Sx

• Profit & Loss from naked written put

Stock Price Call Price

Written Put Date TV Of Call Gain/Loss
Expiration Paid
200
14-Jan 6500 -500 100 -400
100 15-Jan 6600 -400 100 -300
16-Jan 6700 -300 100 -200
0
6500 6600 6700 6800 6900 7000 7100 7200 7300 7400 7500 7600 17-Jan 6800 -200 100 -100
-100 18-Jan 6900 -100 100 0
19-Jan 7000 0 100 100
-200
20-Jan 7100 0 100 100
-300 21-Jan 7200 0 100 100
-400
22-Jan 7300 0 100 100
23-Jan 7400 0 100 100
-500 24-Jan 7500 0 100 100
Gain/Loss 25-Jan 7600 0 100 100
HEDGE OR COVERED POSITIONS
 1. COVERED CALL POSITION
• Profit & Loss from covered call position
Covered Call Written Stock Price
Date Long Stock Premium Short Call Gain/Loss
Expiration
800
14-Jan 6500 -500 100 100 -400
600 15-Jan 6600 -400 100 100 -300
16-Jan 6700 -300 100 100 -200
400
17-Jan 6800 -200 100 100 -100
200
18-Jan 6900 -100 100 100 0

0 19-Jan 7000 0 100 100 100

6500 6600 6700 6800 6900 7000 7100 7200 7300 7400 7500 7600
20-Jan 7100 100 100 0 100
-200
21-Jan 7200 200 100 -100 100
-400 22-Jan 7300 300 100 -200 100
23-Jan 7400 400 100 -300 100
-600
24-Jan 7500 500 100 -400 100
Long Stock Short Call Gain/Loss
25-Jan 7600 600 100 -500 100
 3. REVERSE HEDGES
• SX = INR 7000 , Premium= INR 100 • Profit & Loss from reverse hedge position
Stock Price Pay off
Date Short Stock Long Call
Expiration (Gain/loss)
Reverse Hedge
14-Jan 6500 500 -100 400
600
15-Jan 6600 400 -100 300
400
16-Jan 6700 300 -100 200

200
17-Jan 6800 200 -100 100
18-Jan 6900 100 -100 0
0
6500 6600 6700 6800 6900 7000 7100 7200 7300 7400 7500 7600 19-Jan 7000 0 -100 -100

-200 20-Jan 7100 -100 0 -100

21-Jan 7200 -200 100 -100
-400
22-Jan 7300 -300 200 -100
-600 23-Jan 7400 -400 300 -100
24-Jan 7500 -500 400 -100
-800

Short Stock Long Call Pay off(Gain/loss) 25-Jan 7600 -600 500 -100
 3. PROTECTIVE PUT

• Profit & Loss from protective put

Stock Price Pay off
Protective Put Date Long Stock Long Put
Expiration (Gain/loss)
800
14-Jan 6500 -500 400 -100
600 15-Jan 6600 -400 300 -100
16-Jan 6700 -300 200 -100
400
17-Jan 6800 -200 100 -100
200 18-Jan 6900 -100 0 -100
19-Jan 7000 0 -100 -100
0
6500 6600 6700 6800 6900 7000 7100 7200 7300 7400 7500 7600 20-Jan 7100 100 -100 0
-200 21-Jan 7200 200 -100 100
22-Jan 7300 300 -100 200
-400
23-Jan 7400 400 -100 300
-600
24-Jan 7500 500 -100 400
Long Stock Long Put Pay off(Gain/loss)
25-Jan 7600 600 -100 500
 4. COVERED PUT
• Profit & Loss from covered put
Covered put
Stock Price Pay
600
Date Short Stock Short Put
Expiration off(Gain/loss)
14-Jan 6500 500 -400 100
400
15-Jan 6600 400 -300 100

200
16-Jan 6700 300 -200 100
17-Jan 6800 200 -100 100
0
6500 6600 6700 6800 6900 7000 7100 7200 7300 7400 7500 7600
18-Jan 6900 100 0 100
19-Jan 7000 0 100 100
-200
20-Jan 7100 -100 100 0
21-Jan 7200 -200 100 -100
-400
22-Jan 7300 -300 100 -200

-600
23-Jan 7400 -400 100 -300
24-Jan 7500 -500 100 -400
-800 25-Jan 7600 -600 100 -500
Short Stock Short Put Pay off(Gain/loss)
SPREAD POSITIONS
1. Bull spread using call option: • Profit & Loss from bull spread using call option

Stock Price Long Short Pay off

Bull Call Spread Date
Expiration Call Call (Gain/loss)
600
14-Jan 6500 -100 50 -50
400 15-Jan 6600 -100 50 -50
16-Jan 6700 -100 50 -50
200 17-Jan 6800 -100 50 -50
18-Jan 6900 -100 50 -50
0
6500 6600 6700 6800 6900 7000 7100 7200 7300 7400 7500 7600 19-Jan 7000 -100 50 -50
-200
20-Jan 7100 0 50 50
21-Jan 7200 100 -50 50
-400 22-Jan 7300 200 -150 50
23-Jan 7400 300 -250 50
-600
24-Jan 7500 400 -350 50
Long Call Short Call Pay off(Gain/loss)
25-Jan 7600 500 -450 50
2. Bear spread using call option: • Profit & Loss from bear spread using call option

Stock Price Pay off

Bear Call Spread Date Long Call Short Call
Expiration (Gain/loss)
500
14-Jan 6500 -100 170 70
400
15-Jan 6600 -100 170 70
300
16-Jan 6700 -100 170 70
200
17-Jan 6800 -100 170 70
100
18-Jan 6900 -100 170 70
0
6500 6600 6700 6800 6900 7000 7100 7200 7300 7400 7500 7600 19-Jan 7000 -100 170 70
-100
20-Jan 7100 -100 70 -30
-200
21-Jan 7200 0 -30 -30
-300 22-Jan 7300 100 -130 -30
-400 23-Jan 7400 200 -230 -30
-500 24-Jan 7500 300 -330 -30
Long Call Short Call Pay off(Gain/loss) 25-Jan 7600 400 -430 -30
3. Bull spread using put: 4. Bear spread using put:

Bull Put Spread Bear Put Spread

500 500
400 400
300 300
200 200
100 100
0 0
6500 6600 6700 6800 6900 7000 7100 7200 7300 7400 7500 7600 6500 6600 6700 6800 6900 7000 7100 7200 7300 7400 7500 7600
-100 -100
-200 -200
-300 -300
-400 -400
-500 -500
Long Put Short Put Pay off(Gain/loss) Long Put Short Put Pay off(Gain/loss)
COMBINATIONS
 STRADDLES
LONG STRADDLES WRITTEN STRADDLE

Long Straddle Short Straddle

600 300
500 200
400 100
300 0
6500 6600 6700 6800 6900 7000 7100 7200 7300 7400 7500 7600
200 -100
100 -200
0 -300
6500 6600 6700 6800 6900 7000 7100 7200 7300 7400 7500 7600
-100 -400
-200 -500
-300 -600

Long Call Long Put Pay off(Gain/loss) Short Call Short Put Pay off(Gain/loss)
• STRIPS
CALL PREMIUM: INR 100
• PUT PREMIUM: INR 100 • Profit & Loss from bear spread using strips
• SELLING PRICE: INR 7000
Stock Price Pay
Date One Call Two Put
Long Strip Expiration off(Gain/loss)
1000 14-Jan 6500 -100 800 700
15-Jan 6600 -100 600 500
800
16-Jan 6700 -100 400 300
600
17-Jan 6800 -100 200 100
400 18-Jan 6900 -100 0 -100
19-Jan 7000 -100 -200 -300
200
20-Jan 7100 0 -200 -200
0
6500 6600 6700 6800 6900 7000 7100 7200 7300 7400 7500 7600 21-Jan 7200 100 -200 -100
-200 22-Jan 7300 200 -200 0
23-Jan 7400 300 -200 100
-400
24-Jan 7500 400 -200 200
One Call Two Put Pay off(Gain/loss)
25-Jan 7600 500 -200 300
 STRAPS: • Profit & Loss from bear spread using straps

1200 Stock Price Pay

Long Strap Date Two Call One Put
Expiration off(Gain/loss)
1000
14-Jan 6500 -200 400 200
800
15-Jan 6600 -200 300 100
600 16-Jan 6700 -200 200 0

400 17-Jan 6800 -200 100 -100

18-Jan 6900 -200 0 -200
200
19-Jan 7000 -200 -100 -300
0
6500 6600 6700 6800 6900 7000 7100 7200 7300 7400 7500 7600 20-Jan 7100 0 -100 -100
-200 21-Jan 7200 200 -100 100
22-Jan 7300 400 -100 300
-400
23-Jan 7400 600 -100 500
24-Jan 7500 800 -100 700
Two Call One Put Pay off(Gain/loss)
25-Jan 7600 1000 -100 900
 STRANGLES
• CALL EXERCISE PRICE: 7000
• Profit & Loss from bear spread using strangles
• PUT EXERCISE PRICE: 7100 Stock Price Pay
Date Long Call Long Put
• PUT PRICE: INR 100 Expiration off(Gain/loss)
• CALL PRICE: INR 100 14-Jan 6500 -100 500 400
Long Strangle
600 15-Jan 6600 -100 400 300

500
16-Jan 6700 -100 300 200
17-Jan 6800 -100 200 100
400
18-Jan 6900 -100 100 0
300
19-Jan 7000 -100 0 -100
200
20-Jan 7100 0 -100 -100
100 21-Jan 7200 100 -100 0

0 22-Jan 7300 200 -100 100

6500 6600 6700 6800 6900 7000 7100 7200 7300 7400 7500 7600
23-Jan 7400 300 -100 200
-100
24-Jan 7500 400 -100 300
-200
25-Jan 7600 500 -100 400
Long Call Long Put Pay off(Gain/loss)
THANK YOU