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TCS (Rs 1,119.6): The long-term outlook remains positive for TCS as long as it stays above Rs 870. However, in the short-term, the stock is likely to face a strong resistance at higher levels. We expect the stock to move in a wide range between Rs 1,175 and Rs 915. The stock finds an immediate resistance at Rs 1,143 and support at Rs 1,069.
F&O pointers: The TCS futures saw unwinding of long positions on Friday despite the stock jumping sharply. It shed over six lakh shares in open interest. This indicates that traders are not willing to carry over their position and preferred to bookprofits. Option trading indicates a narrow movement as both calls (higher strikes) and puts (lower strikes) saw an accumulation of open interests. Heavy accumulation of open interest in TCS 1100 strike indicates that it could continue to move around this level.
Strategy: Traders could consider short-strangle on TCS. This can be initiated by selling TCS 1150 call and 1050 put that closed at Rs 23.70 and Rs 10.25 respectively on Friday.
Short strangle strategy is best suited when one considers that the underlying equity is likely to move in a narrow range till expiry. While the maximum profit is the premium collected, the loss could be unlimited if TCS moves sharply in single direction.
Maximum profit occurs if TCS closes between the strike price at the time of expiry.
Writing options involve higher margin commitments. So this strategy is best suited for traders, who are willing to take that risk.
Aurobindo Pharma (Rs 128.4): The long-term outlook remains negative for Aurobindo Pharma as long as it stays below Rs 175. In the short to medium-term, the stock is likely to move in a range between Rs 145 and Rs 120. Aurobindo Pharma could set a clear trend only if it breaks from this band. A conclusive close above Rs 175 has the potential to lift the stock towards Rs 196 initially and even to Rs 220. Conversely a close below Rs 120, could drag it to Rs 98, where it has major support.
F&O pointers: Aurobindo Pharma futures added fresh longs on Friday. However, options are not active on Aurobindo Pharma.
Strategy: Traders could consider going long on Aurobindo Pharma keeping the stop loss at Rs 120 for an initial target of Rs 145. Trail the stop loss so as to protect profit potentials. In case Aurobindo Pharma opens on negative note, investors can stay away from this strategy.
Follow-up: We had recommended a short on United Spirits. Traders could consider holding the position with the stop-loss mentioned. We had also suggested short straddle on NTPC using 170-strike. We recommend holding this position too.
Feedback or queries (on positions) may be sent to >f&o@thehindu.co.in , >blfuturesoptions@gmail.com by Sunday noon. Replies will be published on Monday.
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