Future Perfect: ACC: Consider a bull-call spread

The stock of ACC (₹1,485) has been moving sideways in a ₹1,250-1,650 range for over two years. Only a break from this range will set a clear trend for ACC. The stock finds an immediate resistance at ₹1,520 and a major one at ₹1,615. An immediate support appears at ₹1,373 for ACC and the crucial one at ₹1,315. We expect the stock to move in a narrow range with an upward bias.

F&O pointers: Despite gaining on Friday, ACC December futures witnessed unwinding of 20,000 shares (or 1.38 per cent) in open interest, signalling profit booking by traders. However, ACC futures witnessed a decent roll-over from November to December series. Options are that active.

Strategy: Traders can consider a bull-call spread on ACC by using ₹1,500 and ₹1,540 calls. These calls closed with a premium of ₹44.25 and ₹28.30, which means traders have to fork out ₹15.95 a contract or ₹6,380, as the market lot is 400 shares a contract.

A maximum loss one can suffer in this strategy is the premium paid of ₹6,380, and that will happen if the stock fails to move above ₹1,540 before the expiry of current series.

However, a maximum profit of ₹9,620 is possible if the stock moves past ₹1,540 before expiry of the current series. We advice traders to hold the position till expiry and close it either at a profit of ₹9,620 or if loss mounts to ₹6,380.

Follow-up: Hold L&T ₹1,420 call for a couple of weeks.

 

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