Infosys (Rs 2,863.8): While the long-term outlook for Infosys remains positive, in the short-term it could come under some pressure. It finds immediate support at Rs 2,645 and resistance at Rs 2,910. The long-term outlook will remain intact as long as Infosys trades above Rs 2,240. A close above Rs 3,150 will trigger a fresh rally that can lift the stock to record heights.

F&O pointers: The counter witnessed a marginal accumulation of open interest. Option trading indicates a negative bias.

Strategy: The company is scheduled to announce its fourth quarter results on Friday. Though the stock could swing wildly in reaction to the numbers immediately, Infosys will settle in a range after a while. Traders could consider short straddle on Infosys to benefit from the range. This can be initiated by selling Rs 2,850 strike of call and put options. They closed at Rs 116.85 and Rs 100 respectively. Market lot is 125.

Short straddles are a good strategy to pursue if an investor believes that the stock price will move in a narrow range. The maximum profit of Rs 27,000 occurs if the stock settles at Rs 2,850. While profits are limited to the extent of premium collected, the loss could be unlimited if Infosys swings wildly in one direction. A close above Rs 3,050 or below Rs 2,650 will start pinching the position.

Consider this strategy for at least for two weeks and review it later.

This strategy is for traders who can bear the risk. Risk-averse traders can stay away from this strategy. Besides, writing options involve margin commitments.

Follow-up: Last we had advised shorting Hero MotoCorp. The stock achieved our desired target.

Note : Feedback or queries (on positions) may be sent to >blfuturesoptions@gmail.com by Sunday noon. Replies will be published on Monday.

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