Consider bear put spread on RIL

Though the long-term outlook for Reliance Industries (₹1,246) remains positive, in the short term, it may remain volatile with a negative bias.

The stock faces an immediate support at ₹1,220, and a close below that will drag it towards ₹1,108 or even to ₹1,027.

A close below the latter will alter even the long-term bullish view. On the other hand, a close above ₹1,372 will trigger a fresh rally.

F&O Pointers: Open interests remain stable at around 4.2 crore despite the stock remaining under pressure in the past few days.

Options trading indicates a range of ₹1,200-1,400 for the stock.

Strategy: Traders could consider a bear put spread on RIL. This can be done by buying the ₹1,260 put and simultaneously selling the ₹1,220 put. These options closed with a premium of ₹50.5 and ₹33.05, which means one has to shell out ₹17.45 a contract.

The maximum loss would be ₹8,725 as the market lot is 500 units, and that will happen if the stock rises and closes above ₹1,260 at the time of expiry.

A maximum profit of ₹11,275 is possible if RIL closes below ₹1,220.

We advise traders to hold the position till expiry. Traders should bear it in mind that selling options costs higher margin commitments.

Follow up: Hold Ashok Leyland position

Read the rest of this article by Signing up for Portfolio.It's completely free!

What You'll Get





Related

  1. Comments will be moderated by The Hindu Business Line editorial team.
  2. Comments that are abusive, personal, incendiary or irrelevant cannot be published.
  3. Please write complete sentences. Do not type comments in all capital letters, or in all lower case letters, or using abbreviated text. (example: u cannot substitute for you, d is not 'the', n is not 'and').
  4. We may remove hyperlinks within comments.
  5. Please use a genuine email ID and provide your name, to avoid rejection.