Reliance Communications (Rs 108.3): After the recent sharp run-up, the stock of Reliance Communications appears to be heading for a correction. It now finds support at Rs 95.8 and the next one at Rs 83. As long as it holds above Rs 83, the medium-term outlook remains positive. In that event, it can touch Rs 131 and even Rs 145.

F&O pointers: The RCom June futures witnessed a healthy rollover of 22 per cent. Option trading indicates a positive bias, as puts witnessed higher accumulation of open interest positions.

Strategy: Consider bear call spread on Reliance Communications. This can be initiated by selling RCom June 100 call and buying June 107.5 call. They closed at Rs 14.1 and Rs 10.1 respectively on Friday. This entails a net inflow of Rs 4, which could be the maximum profit potential in this strategy. This will happen if RCom settles at or below 100. The maximum loss in this strategy will be Rs 3.5/contract, for which RCom has to close at or above Rs 107.5. Though the risk-reward ratio is unfavourable, traders could consider this as RCom is a high-beta stock, which could fall along with the broader market.

Follow-up: Traders could review their long strangle position on Reliance Industries after two weeks.

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

comment COMMENT NOW