Calendar bull-call spread on Infosys

The outlook for Infosys (₹684) remains positive. The stock finds an immediate support at ₹642 and resistance at ₹724. A conclusive close above the latter will trigger a fresh rally in Infosys.

In that event, it could register a new peak and may reach ₹810. The stock finds a crucial support at ₹590; a close below this level will alter the bullish view. We expect the stock to remain bullish and touch a new peak.

F&O pointer: The Infosys futures is quoting in discount, with respect to the spot price due to dividend (₹7), for which the ex-date is October 25. The counter witnessed a healthy roll-over of 22 per cent to the November series. Trading in Option indicates that the stock could move in a ₹650-750 range.

Strategy: We advise traders to consider a calendar bull-call spread on Infosys. This can be initiated by selling the current month ₹680-call and simultaneously buying the ₹680 November call. They closed with a premium of ₹9.05 and ₹24.90, respectively. As the market lot is 1,200 units per contract, the strategy will cost ₹19,020. This will be the maximum loss one could suffer in this strategy, if Infosys dips below ₹680 at the time of (November) expiry.

However, the potential for profit is huge if Infosys takes a dip in the next four days and gains sharply in the next series. We advise traders to hold the position till mid-November. The position will turn positive once Infosys moves past ₹695.85. Traders could consider exiting from the position if the loss mounts to ₹9,500. This strategy is for traders who can withstand the risk in options trading.

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