FLOATER, Vivekam’s own fully hedged derivative product is an offering with monthly expiry, which is designed with an investment model of limited downside and unlimited upside. We have understood that forecasting movement of Index was easier than compared to individual stocks. This product is designed for high-risk appetite investors, with a basic principle of “Higher the risk – Higher the reward”.
To make money in equity markets, selling price must be more than buying price for any investor / trader / speculator. Even if Buy and Sell rates are same, profit for investors in equity segment and derivative segments will be vastly different. Within derivatives, there is a difference between futures and options.
From the above table, one can easily see that trading in equities is very expensive when compared to futures or options. While options look very attractive in terms of return on investment in percentage terms, liquidity is low for most options. Impact cost (loss due to low liquidity) and Volatility premium need to be understood before stepping into futures and options.
What is Nifty Floater?
A purely derivative product working on monthly expiry Futures & Options. Vivekam has built a model to help it forecast likely trends in prices of Indices. Vivekam’s model aims to capture a minimum of 2% on each signal. Since leveraging is allowed it works out to 10% gain. Depending on the movement of the index, we advise to take a position of it either going UP or DOWN. Based on this prediction, we advise from a number of designed strategies (Bullish, Bearish, Bull Spread, Bear Spread…).
As an example, Vivekam advises a BUY/SELL of Nifty Index futures as well as fully hedged options against the index to protect the investor. With downside being protected 100% of the time, the investor can be rest assured of the maximum loss that they may see each month. With our advised strategy, the maximum downside is always capped around 5% – 7%, whereas the upside is unlimited. We still have a reasonable 10 – 12% as approximation of a successful month.
Considering the relatively high liquidity seen in Index Futures/Options, Vivekam suggests investors to be involved in Index futures and options. In the event of liquidity drying up, theory of stoploss may not be effective in individual stock futures or options there on.
Vivekam’s FLOATER follows a Risk-Return ratio of 1%:1.35%. Accounting for expenses incurred in trading etc, it is reasonable to expect 15% return per annum from FLOATER.
For how long?
ViVeKam’s analysis of past data suggests a minimum period of 2 years to achieve the optimal results of the product.