Covered call writing can yield good returns in volatile phase: Prakash Diwan

In a chat with ET Now, Prakash Diwan, Altamount Capital Management, shares his view on where the market is headed towards.

ET Now: What are you doing for your clients right now? Are you contemplating buying stocks or would you just wait for the dust to settle down completely?
Prakash Diwan: Both. In select pockets, the market is offering wonderful opportunities to do stuff such as covered call writing. Luckily, I also have a team of derivatives specialists, who guide us on that.

Now what that entails or why that make sense today is that most largecap stocks seem to be vacillating between a very well-defined range, especially in the case of largecap pharma and FMCG names and heavy weights like Reliance Industries. You have seen the way banks lost so much ground, the way they have come back and are leading the charge.

It is so news sensitive now; it is kind of triggered by events, which are fairly large, bearing on the stock prices. For instance, Motherson Sumi lost so much of ground.

I was surprised that it is in the green again. The same thing happened to SKS Microfinance, a couple of days back. So, the market is overreacting to bad news. It digests the facts and figures and then realise that after all, things are not that bad.
So on Wednesday, it has happened to Bosch. I am sure if somebody were to do a simple trade, he needed to buy Bosch on Wednesday and wait for it to bounce back.
So, it is a very logical, commonsensical approach. What we are telling our clients to do is look for covered call writing wherever you have good blue chip stocks.
That is going to yield you a lot of money in the ongoing phase of volatility. The October F&O series options have also become slightly more active now. This was a short series of sorts.
If we are selecting something, yes some select midcaps we have been nibbling into and we will continue to do that on all dips.