The immediate outlook for Canara Bank (₹275) is bullish with resistance at ₹285. A close above this level will take it to ₹345. Also, a breach of ₹385 will turn the medium-term outlook positive for a rally to ₹520. Support is at ₹245. A close below this can drag the stock lower to ₹215.

F&O pointers: The Canara Bank futures saw just 9 per cent rollovers to next series. Option trading indicates a neutral view, as calls and puts saw unwinding of open interest. Heavy open positions at ₹280 indicates that Canara Bank may hover at this level.

Strategy: With just three days left for settlement, traders can consider a strategy that involves options of both the current and next month. They can consider selling April ₹280-call and simultaneously buying May ₹300-call which are at a premium of ₹4.05 and ₹15 respectively. This strategy will result in an initial outflow of ₹10,950.

Maximum profit occurs if Canara Bank stays around ₹280 in the near-term and starts moving up, at the start of the next month series. Once the near month option expires worthless, the upside profit potential of the next month’s long call becomes unlimited.

However, loss will occur if Canara Bank rises sharply before the expiry of the current month series and reverses lower again in May. However, the loss potential is very limited in this strategy. Traders can exit if the May option premium hits ₹45 or ₹7. Selling options involve higher margin commitments.

Follow-up: Last week, we had advised a strategy on SBI, betting on the downside. However, the stock reversed its direction. We advise traders to exit their positions.

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