India Stocks: Continue Managing Risk

As this market exploded upwards, I sold Nifty 2600 November Calls at a price of Rs 132.  I continue to believe the market has a fair value of Nifty 2475...so any significant move will revert back to the mean...on the upside and downside.  In this case, my fair value is the Mean.

I am seriously thinking of moving a portion of the invested funds into Bank Nifty...so I would be 5% Bank Nifty, 15% Nifty and 80% cash.  With my short call position I am even more in cash right now.  The pay-off now looks as follows with my long Nifty at 2436 and short calls at 2600 and premium received of 132.

Nifty        Nifty       Calls    Premium       Net
2300       -136           +0         +132             -4
2400       -36             +0        +132           +96
2500      +64            + 0        +132           +196
2600      +164          +0         +132           +296
2700       +264        -100       +132          +296
2800      +364         -200      +132          +296
2900      +464         -300      +132          +296

By the way, it looks like Citi is toast...wouldn't it be appropriate if China and India got together and bought the firm...excluding the North American retail arm.

Citi Weighs Its Options, Including Firm's Sale

Citigroup May Seek Merger as Stock Plunges Further