Stock Strategy: Consider shorting L&T



L&T : Friday's fall triggered a fresh weakness in Larsen & Toubro. The stock now finds crucial support at Rs 1,511 and the next one at Rs 1,407, which is a crucial one. A fall below the crucial support will change the outlook to negative.

Now only a close above Rs 1,785 would change the outlook to positive for the stock. L&T now finds immediate resistance at Rs 1,641.

F&O pointers: The L&T August futures added fresh short positions.

The counter witnessed a rollover of about 16 per cent to the September series. Options of the September series also indicate a negative bias, as 1,550 put saw heavy unwinding in open interest even as 1,650 call saw heavy accumulation.

Strategy: Consider going short on L&T August futures with a tight stop-loss at Rs 1,511 (spot price on a closing day basis) for an initial target of Rs 1,407. Traders can even consider rolling over the position till the target is achieved. Market lot of L&T is 250.

Alternatively, traders can consider writing 1,650 Sept call, which closed around Rs 25 on Friday. While maximum profit in the strategy is the premium collected (i.e. 25 * 250 market lot), loss could be unlimited if L&T starts moving up swiftly. Besides writing a call involves margin commitments. So this strategy is for traders who can afford to bear such high risks.

Suzlon: The long-term outlook remains negative for Suzlon. However, in the medium-term it could move in a range of Rs 34-45. Only a break from this range would set a clear direction for the stock. Suzlon finds an immediate support at Rs 36 and resistance at Rs 42.2.

However, a close below Rs 34 would trigger a fresh selling in the stock, which could set a new low.

F&O pointers: The Suzlon futures (market lot 8,000) saw a strong rollover of over 31 per cent to the September series.

However, it seems most of the rollovers were on the short side.

Strategy: Traders can consider setting a short strangle on Suzlon using 37.50 put and 40 call of August series. While the former closed at Rs 1.15, the latter ended at Rs 0.3. The maximum profit in this strategy is total premium collected (i.e. 1.15 + 0.3 * 8000). Loss, however, can be unlimited if Suzlon either jumps above Rs 40 or slumps below Rs 37.5 decisively.

This strategy is for traders who are willing to take high risks.

The maximum profit zone would be hit only if the stock settles between Rs 37.5 and Rs 40 at the time of expiry. Writing options also involves high margin commitments.

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.

Read the rest of this article by Signing up for Portfolio.It's completely free!

What You'll Get





Related

This article is closed for comments.
Please Email the Editor