Future perfect: Consider calendar put on Sun TV

The outlook for Sun TV Network futures (₹591.25) has turned negative. Only a close above ₹744 will alter the bearish view on Sun TV for the long term. The stock finds immediate support at ₹560 and a resistance at ₹666. It finds a key support at ₹543; a close below that can drag it to ₹447. We expect the stock to remain under pressure over the immediate term.

F&O pointer: The Sun TV current month futures witnessed a rollover of 38 per cent to January series. Though this is a normal signal, the unmatched order book indicates a negative bias, as more traders wish to rollover short positions. Trading in the current month options indicates a range of ₹620-580 for Sun TV, and the January month options are not that active.

 

 

Strategy: We advice traders to consider a calendar put strategy, which can be initiated by selling the current month ₹580-put and simultaneously buying the next month ₹580-put. These options closed with premiums of ₹5.30 and ₹21.35 respectively.

As the market lot is 1,000 shares per contract, one has to fork out ₹16,050, which would be the maximum loss one can suffer. The position will turn negative if Sun TV moves up.

Profit potentials are huge in this strategy, if Sun TV rises in the next three days (Tuesday holiday) that is in the current month and witnesses a sharp fall thereafter.

Traders should remember that the stock may remain resilient as the retail holding is very low. Those short in the market may have to struggle for delivery of shares; this will keep the stock in float. We advice traders to exit the position if the loss hits ₹8,000. Hold the position for at least three weeks.

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