Adani Enterprises can move in a narrow range. Hence, a short-strange strategy is recommended.
Adani Enterprises (₹215): Adani Enterprises finds immediate support at ₹205 and resistance at ₹235. A conclusive close above ₹235 has the potential to take the stock towards ₹275. However, a close below ₹205 can take it to ₹180.
F&O pointers: Adani Enterprises’ February futures witnessed unwinding of long positions on Friday along with a decline in share price. However, it provides little cue, as just 12,000 shares got squared off on Friday. Options are not very active.
Trading in options indicates a negative bias, as ₹220-strike put, shed open position, indicating that it could act as a strong resistance for the stock.
Strategy: With just two weeks to settlement, short-strangle strategy can help traders make the most from the narrow movement. They can consider selling the ₹230-strike call and ₹210-strike put options. This will result in an inflow of ₹11,900, as the options closed at ₹2.15 and ₹3.80, respectively.
As the maximum profit is the premium collected, we advise traders with high-risk appetite to consider this strategy. Besides, the loss could be unlimited if Adani Enterprises pursues a unidirectional move — either up or down.
A close below ₹204 or above ₹236 will affect traders’ position in this strategy.
In other words, a loss of about 5 per cent or gain of 10 per cent from current levels before the expiry, will pinch traders.
Square off the position if Adani Enterprises reaches ₹210 or ₹225. Stop-loss can be placed where the combined premium touches ₹8. It may be noted that writing (selling) options involves higher margin commitments. Maximum profit will occur if the stock closes between the strike prices.
Follow-up: Last week, we had advised short-strangle on Arvind. The stock has been moving on expected lines. Traders could consider holding it till expiry.
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.