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The stock of Aurobindo Pharma (₹720.5) is ruling at a crucial level, and finds strong resistance at ₹773. A close above this resistance will trigger a fresh rally, taking the stock to a new peak. On the other hand, the stock finds an immediate support at ₹662 and a crucial one at ₹617. A close below the latter will alter the positive outlook on the stock.
F&O pointers: Aurobindo Pharma futures shed open positions along with a fall in share price on Friday. This indicates that traders are not willing to carry over the positions, signalling bearishness. Option trading indicates that the stock could move inthe ₹700-760 range.
Strategy: Traders could consider a bull call spread on Aurobindo Pharma. This can be initiated by selling ₹720-call November while simultaneously buying the ₹700-call. These options closed with a premium of ₹45.60 and ₹36, respectively.
To adopt the strategy, traders will have to pay ₹9,600 or (₹9.60/contract), as the market lot is 1,000 shares per contract. This will be the total loss one will suffer if Aurobindo Pharma closes at or below ₹700. A profit of ₹10,400 is possible if the stock stays at or above ₹720 at the time of expiry. We advise investors to hold the position till expiry, as the company is coming out with its quarterly results on November 11. Post-result, it could swing wildly, based on the numbers. However, we are biased on the positive side for Aurobindo Pharma.
Follow-up: Those who are still holding Infosys call options can continue to do so.
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