Stock Strategy: Siemens likely to move in a range



Siemens (Rs 736): After falling sharply since November, Siemens had a reversal in trend on Friday. The stock is now placed at a critical level. Only a close above Rs 835 will change the short-term outlook to positive for the stock. In the short-term, the stock is likely to move in the range of Rs 835-670.

The stock finds immediate support at Rs 702. A conclusive close below that could take Siemens to Rs 670. A close below Rs 670 would change the long-term outlook to negative.

F&O pointers: The Siemens November futures added fresh long positions on Friday. It saw a rollover of just 11 per cent. Most of the positions were on the long side, as December futures commands higher premium over the spot price. Options were not that active. However, some cues available from option trading indicate that Siemens faces strong support as Rs 700 and Rs 740, as puts at these strike prices saw higher accumulation of open interest.

Strategy: Traders can consider going long on Siemens. The stop-loss can be placed at Rs 702 for an initial target of Rs 804.

Traders could also consider a short-strangle using 740 put and 800 call of December series. This strategy is best suited when one thinks the stock is likely to move in a narrow range.

Maximum profit occurs if the stock price settles between the strike prices.

While the maximum profit is limited to the premium collected, loss could be unlimited if Siemens surges or slumps beyond the strangle range mentioned.

Besides, writing (selling) options involves higher margin commitments, as the market lot is 250 units per contract. The Siemens 740 put closed at Rs 39.7 while the 800 call ended at Rs 12.

Hero MotoCorp (Rs 2,194): The long-term outlook remains positive for Hero MotoCorp as long as it stays above Rs 1,855.

However, the stock might face a strong resistance at Rs 2,222. Hero MotoCorp finds an immediate support at Rs 2,035 and a close below that would weaken it to Rs 1,905.

F&O pointers: The Hero MotoCorp November futures added fresh long positions on Friday. It saw a rollover of 27 per cent. Both the December and November futures on Hero MotoCorp are trading in discount against the spot close. However, options signal positive bias.

Strategy: Traders can consider selling 2,200 call that ended at Rs 30 on Friday. While the maximum profit is the premium collected, loss could be unlimited if Hero MotoCorp surges sharply.

Maximum profit would occur if Hero MotoCorp closes below or at Rs 2,200 on expiry.

Market lot is 125 shares a contract.

Follow-up: We had recommended a short on JP Associates and a long on Hindustan Construction Co. While the former achieved the target, the latter moved in opposite direction resulting in losses.

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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