Technical Analysis

Consider short strangle on DLF

KS Badri Narayanan | Updated on November 09, 2014 Published on November 09, 2014

The outlook remains negative for DLF (₹134.5). The stock finds long-term support at ₹100. Immediate resistance is at ₹155 and the next resistance is placed at ₹182. A close below ₹100 will trigger a fresh sell-off in the stock, which could drag it down to ₹77-80. However, in the short term, the stock is expected to move within a range of ₹100-155.

F&O pointers: DLF futures shed 23.46 lakh shares in open interest on Friday, despite a sharp surge in price. This indicates profit taking. Options trading indicates a range of ₹120-140 for the stock.

Strategy: Traders could consider a short strangle on DLF. This can be initiated by selling ₹110 put and ₹155 call. They closed with a premium of ₹1.5 and ₹1.6, respectively. Maximum profit in this strategy is the premium received, which works out to ₹6,200. For that to happen, DLF has to settle between ₹110 and ₹155.

However, losses in this strategy could be unlimited. The position will start pinching the trader, if the stock moves above ₹158 or below ₹107.

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