STANDARD OPERATING PROCEDURE FOR THE

STOCK MARKETS BUSINESS

DRAFT DATE 7TH APRIL 2019
DRAFTED BY ANKIT SINHA
NEXT UPDATION DATE TH
30 SEPTEMBER 2019

➢ INTRADAY TRADING :- CURRENTLY, THERE IS NO POLICY FOR INTRADAY TRADING.

AS A RESULT OF HIGH RISK APPARANTLY LESS BENEITS, AS OF NOW NO INTRADAY TRADING

WILL BE DONE.

➢ EQUITY :- CURRENTLY, NO EQUITY IS BEING TRADED BECAUSE TARGETS CANNOT BE

PREDICTED IN SHORT TERM AND THE COST OF FUNDS OF FIXED MONTHLY. FURTHER ONLY
LONG POSITION CAN BE MADE IN EQUITY WHICH IS RISKY CONSIDERING THE NATURE OF
STOCK MARKETS.

HOWEVER, GOING FORWARD, THE EQUITY INVESTMENT WILL BE DONE WHEN THE DEBT
EQUITY RATIO WILL BE HEALTHY AROUND 50 PERCENT EACH. FOLLOWING INITIAL POLICIES
WILL BE FOLLOWED:-

1. MAXIMUM 20 % OF TOTAL FUNDS WILL BE INVESTED IN A SINGLE EQUITY.

2. THE EQUITY WILL BE PLEDGED AND MARGINS RELEASED WILL BE USED FOR OPTION
WRITING.
3. THE INVESTMENT WILL BE DONE IN LARGE CAP BLUECHIP COMPANIES ONLY IF
OPPORTUNITY IS THERE.
4. IF THE INVESTMENT IS BEING DONE IN SMALL CAPS OR MID CAPS, THE MAXIMUM 10 %
OF TOTAL FUNDS WILL BE INVESTED IN A SINGLE EQUITY.

➢ FUTURES :- CURRENTLY, FUTURES TRADE IS BEING DONE OCCASSIONALLY AND IS IN TRIAL

STAGE.

HOWEVER FROM NOW ONWARDS, FUTURES TRADE WILL BE DONE REGULARLY.

FOLLOWING WILL BE POLICY FOR THE TRADING IN FUTURES:-

1. FUNDS UPTO A MAXIMUM OF 25 % OF TOTAL FUNDS WILL BE USED.

2. TRADING POSITIONS TAKEN UPTO 15TH OF THE MONTH WILL BE GENERALLY DONE
IN NEAR MONTH UNLESS THERE IS REASONABLE REASON. AFTER 15TH, POSITIONS
WILL BE TAKEN FOR NEXT MONTH FUTURES FOR STOCKS WITH COMPULSORY
PHYSICAL DELIVERY OBLIGATION. THIS WILL BE APPLICABLE FOR ALL STOCKS AFTER
OCTOBER 2019.

3. CURRENTLY FOR STOCKS WHERE COMPULSORY PHYSICAL DELIVERY IS APPLICABLE

ON EXPIRY, THE POSITION WILL BE SQUARED OFF ON THE FRIDAY OF THE THIRD
 WEEK OF THE RESPECTIVE MONTH. IF CONDITIONS ARE CONSIDERED FAVORABLE,
ROLLING OVER FUTURES POSITIONS FOR THE NEXT MONTH CAN BE TAKEN IN THE
SAME UNDERLYING STOCK.

4. ALL POSITIONS TAKEN ON LONG SIDE SHOULD BE PROPERLY HEDGED USING

OPTIONS.

5. GENERALLY, IT IS ADVISABLE TO TAKE SHORT POSITIONS IN THE MARKET AS THERE

IS PREMIUM AVAILABLE OVER AND ABOVE THE CURRENT PRICE.

6. GENERALLY, ALL FUTURES POSITIONS LONG OR SHORT HAVE TO SQUARED OFF

WITHING A WEEK OF TAKING POSITION.

7. EXCEPTIONS TO THE ABOVE RULE HAVE TO BE RECORDED IN WRITING ALONG WITH

REASONS.

➢ OPTION WRITING :- OUR MAIN BUSINESS CONSISTS OF OPTION SELLING. FOLLOWING

POLICIES SHALL BE FOLLOWED IN RESPECT OF THIS SEGMENT :-

1. THERE IS NO MAXIMUM LIMIT APPLICALBLE FOR FUNDS UTILIZATIONS UNDER THIS

SEGMENT. HOWEVER, MINIMUM 50 % OF THE FUNDS WOULD ALWAYS BE UTILIZED
FOR THIS SEGMENT.

2. A MAXIMUM OF TOTAL 25 % FUNDS CAN BE ATTRIBUTED TO A SINGLE UNDERLYING

EQUITY IN CASE OF UNHEDGED CALL WRITING POSITIONS BEING TAKEN.

3. NO PUT WRITING SHALL BE DONE WITHOUT BUYING A PUT OPTION FOR HEDGING
PURPOSE.

4. 40 % OF ALL THE FUNDS USED SHALL BE ALWAYS IN STRATEGY WHERE BOTH CALLS AND
PUTS WILL BE WRITTEN IN THE SAME UNDERLYING SO THAT MARGIN REQUIREMENTS
SHORTAGE DOES NOT HAPPEN. FURTHER AS ALREADY MENTIONED UNDER POINT 3,
HEDGING SHALL BE DONE FOR PUT SIDE WRITING OF OPTION.

5. A MINIMUM GAP OF 5 % IS TO BE MAINTAINED ON EACH SIDE WHEN POSITION IS TO BE

TAKEN BEFORE 15TH OF THE RELEVANT MONTH.

6. CURRENTLY FOR STOCKS WHERE COMPULSORY PHYSICAL DELIVERY IS APPLICABLE ON

EXPIRY, THE POSITION WILL BE SQUARED OFF ON THE FRIDAY OF THE THIRD WEEK OF
THE RESPECTIVE MONTH. IF CONDITIONS ARE CONSIDERED FAVORABLE, SIMILAR
POSITIONS FOR THE NEXT MONTH CAN BE TAKEN IN THE SAME UNDERLYING STOCK.

7. IF A STOCK TRADES IN THE MONEY FOR MORE THAN A WEEK AND THE CURRENT DATE IS
LESS THAN 15TH OF THE MONTH, A HEDGING POSITION HAS TO BE TAKEN FOR CALLS
 WRITTEN. IN CASE OF DATE BEING BEYOND 15TH, THE POSITION HAS TO BE SQUARED
OFF IF THE COMPULSORY PHYSICAL DELIVEY IS APPLICABLE TO THE STOCK.

8. EXCEPTIONS TO THE ABOVE RULE HAVE TO BE RECORDED IN WRITING ALONG WITH

REASONS.

STOCK SELECTION PROCESS

A BRIEF ANALYSIS OF MINIMUM THESE POINTS SHALL BE DONE
BEFORE TAKING POSITION IN ANY UNDERLYING:-

➢ TECHNICAL CHART ANALYSIS

➢ MARKET DEPTH
➢ OPEN INTEREST ANALYSIS
➢ OPTION CHAIN ANALYSIS
➢ SECTOR ANALYSIS
➢ BROAD MARKET TREND
➢ MONEYCONTROL BASIC FUNDAMENTAL DETAILS
➢ CORPORATE ACTION ANALYSIS
➢ NEWS ANALYSIS