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After the result announcement on Friday, the Infosys stock fell sharply. Despite this, the long-term outlook remains positive for the company. We expect the negative bias to continue for a few more days, before the stock show some resilience. The stock finds immediate support at ₹1,906 and resistance at ₹2,103.
F&O pointers: The counter witnessed a rollover of just 23 per cent to May. Option trading indicates that the stock will hover around ₹2,000.
Strategy: Traders can consider a bull-call spread on Infosys. This can be constructed by buying Infosys ₹2,000 May call and simultaneously selling ₹2,100 call. They closed with a premium of ₹76 and ₹37 respectively. This will entail an initial outflow of ₹39/contract (or ₹9,750), which is the maximum loss one can occur in this strategy. For that to happen, Infosys has to settle at or below ₹2,000 by the expiry of May.
On the other hand, if Infosys recovers and closes at or above ₹2,100, this position will yield a maximum profit of ₹61/contract (or ₹15,250). We advocate traders hold this strategy till the May expiry or the underlying stock hit ₹2,100.
Follow-up: Hold Reliance Communications positions.
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