The long-term outlook remains negative for Housing Development and Infrastructure (HDIL) that closed at ₹89.7. Only a close above ₹120 will change the medium-term outlook to positive. The immediate resistance is at ₹103, while it finds key support at ₹87. We expect the stock to move within this range. A close above ₹120 could lift the stock to ₹145, and a close below ₹87 could drag it down to ₹75.

F&O pointers: The counter added heavy short positions on Friday which aggravated the slide. Option trading indicates a range of ₹90-110.

Strategy: Traders can consider a short strangle on HDIL. This can be initiated by selling ₹100-call and ₹80-put on HDIL. They closed with a premium of ₹1.65 and ₹1.5 respectively. The short strangle strategy is considered when the underlying equity is expected to move in a narrow range in the near term. Traders will receive an initial payment of ₹3.15 a contract (or ₹25,200), which will be the maximum profit in the strategy. For that to happen, HDIL has to settle between ₹100 and ₹80 at the time of expiry.

However, if HDIL swings sharply in either direction — up or down — the strategy will start making losses. A close above ₹101.65 or below ₹78.5 will hurt the position.

Traders can exit their position if the loss mounts to ₹8,000. Since the market is volatile currently, this strategy may be risky. Besides, selling options involve high margin payments.

Follow-up: Last week, traders were advised to consider long strangle on Bank Nifty. The position is in profit zone. Traders can consider holding the position as suggested.

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