Astonishing 500% return: How a single option contract of this real estate company delivered a multibagger win!

Purchasing an option becomes advantageous during periods of strong momentum in a stock or index, yet it’s essential to note that it’s not foolproof, given the market’s supremacy and its ability to defy expectations. For novices, delving directly into options trading isn’t advisable. It demands expertise, a comprehensive understanding, and considerable skill in navigating the options market. Furthermore, engaging in naked options trading poses significantly higher risks compared to using hedges.

Options serve as hedging tools, although nowadays, they are frequently traded in both stocks and indexes because they demand less money when a trader buys an option contract, selling the same contract requires a significant amount of money.

For option holders, time decay (theta) poses a challenge, whereas it serves as a revenue stream for the seller. In essence, buying options demands meticulous observation and careful execution before committing your hard-earned funds to any option contract.

In this article, we will delve into the scenario where an individual purchased a single lot of an Oberoi Realty Call option the day immediately following the expiration of the last contract, which occurred on October 26, 2023. To conduct a thorough analysis, we will consider the closing price of the subsequent day, October 27, 2023.

On October 27, Oberoi Realty shares commenced trading at Rs 1079.80 per share, reaching intraday highs and lows of Rs 1,104.90 and 1,071.10, respectively, and ultimately concluding the day’s trading at Rs 1099 per share. Simultaneously, the 1100-strike call option contract opened at Rs 31 per lot, registering intraday highs and lows of Rs 40.90 and 25.70, respectively, and eventually closing at Rs 35.55 per lot, indicating a remarkable 36.47% increase or Rs 9.50 per lot compared to the previous day’s closing price of Rs 26.05 per lot.

With a lot size of 700 quantities, the total purchase value amounted to Rs 24,885, which was the amount expended to acquire a lot. For comparison, purchasing 700 quantities of the company’s shares at Rs 1099 per share would have cost you Rs 7,69,300 (Rs 1099 * 700 qty).

Shifting the focus to the current performance of the stock and the purchased call option contract, since the purchase date, Oberoi Realty Limited shares have appreciated by over 21%, currently trading at Rs 1,336 per share as of the article’s writing. Concurrently, the option contract with the same strike price is trading at Rs 237.55 per lot, indicating a 568% increase during the same period compared to the closing price on October 27.

Upon calculating the profit, it stands at Rs 202 per lot, resulting in a profit of Rs 1,41,400 lakh in value terms. This signifies that an initial investment of Rs 24,885 transformed into Rs 1,66,285, representing a remarkable 568% gain within just 21 days.

Stock Price Chart and Options Call Option Contract chart on the daily time frame

>Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.