Bear call spread in Ashok Leyland

The long-term outlook for Ashok Leyland remains bullish as long as it stays above ₹36.5. The stock finds immediate support at ₹49.1; the next crucial one is at ₹46.5. It can touch ₹59.5 if it sustains its current rally. However, the stock is likely to face resistance in the near term.

F&O pointers: The stock has been adding open interest. This indicates bullish momentum. Option trading indicates a range of ₹50-55 for the stock.

Strategy: Traders can consider a bear call spread on Ashok Leyland. This can be initiated by simultaneously selling ₹50 call and buying ₹57.5 call. This strategy will yield an income of ₹3.9/contract, as these options closed with a premium of ₹4.75 and ₹0.85 respectively.

This could also be the maximum profit one can earn from this strategy. For that to happen, Ashok Leyland must settle at or below the lower strike price of ₹50.

However, traders could also lose ₹3.6/contract if Ashok Leyland rallies above ₹57.5 at the time of expiry.

Since the market lot is 11,000 per contract, this strategy is best suited for traders who can bear high risks.

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