Larsen & Toubro (Rs 1,506.5): Despite its recent recovery, the immediate-term outlook for L&T remains negative. The stock finds immediate resistance at Rs 1,560 and support at Rs 1,410. It finds crucial support at Rs 1,260 and the major one at Rs 1,195, a close below which will change the long-term outlook negative. Only a close above Rs 1,785 will change the long-term outlook positive for the stock.

F&O pointers: The L&T March futures added fresh shorts on Friday along with a fall in share price. Option trading also indicates negative bias, as lots of call writers emerged. Besides, puts witnessed shedding of open interests, indicating that put writers (sellers) are covering their positions, fearing further fall in the stock. Put writing was evident even in strike as low as Rs 1,300.

Strategy: Traders could consider selling L&T futures with stop-loss at Rs 1,540, which can be shifted to Rs 1,521 if the stock opens on a negative note. Risk-willing traders could even considering rolling over their positions.

Alternatively, traders could also consider buying 1,500 put that closed at Rs 30 on Friday. While the maximum loss in this strategy is the premium paid (i.e. 30*250 = Rs 7,500), profit is unlimited if L&T dips sharply as expected.

Traders could also consider buying 1,450 April put that ended at Rs 25.70. Though it is illiquid, (only 3 contracts traded on Friday), the volume will pick up as current month contracts’ expiry nears.

Follow-up: Last week we advised short straddle on NTPC using 150-strike. The position is currently neutral. Traders could consider holding it for one more week.

( 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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