Market Strategy

Consider a strategy with Tata Motors stock, DVR

K.S. Badri Narayanan | Updated on October 12, 2013 Published on October 12, 2013

Tata Motors/DVR (Rs 385.15/Rs 193.30): The outlook for both Tata Motors and its DVR shares remain positive. Both the stocks touched their all-time high last week. They will maintain this rally as long as they stay above Rs 325 and Rs 150 respectively. Immediate support for Tata Motors is at Rs 349 and for DVR at Rs 172.5.

In the last couple of days the DVR shares were able to narrow the discount (from Tata Motors) below 50 per cent. The discount of DVR stock is typically around 45 per cent in rallies and above 50 per cent in market declines.

F&O pointers: Both the counters added fresh long positions on Friday along with rise in share price. Option trading on Tata Motors indicates a positive bias, as calls shed open interest. It also indicates that Rs 360 will be difficult to break.

Strategy: Traders could consider selling Tata Motors 400 call and buying Tata Motors DVR 200 call. They closed at Rs 7.65 and Rs 4.35 respectively. This will incur an initial outgo of about Rs 1,050. Market lot of DVR is 2,000 while that of Tata Motors is 1,000. Maximum loss will be the initial outgo while the profit potential is unlimited, if both the counters sustain the bull party. To suffer the maximum loss, both counters have to close below Rs 398 and Rs 198 respectively.

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

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