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The short-term outlook for Crompton Greaves is neutral. The stock finds immediate resistance at ₹197 and support at ₹163. A close below ₹149 will change the outlook to negative. A conclusive close above ₹197 will lift Crompton Greaves to ₹236, which is a crucial level.
F&O pointers: The July futures shed over 7.2 lakh shares on Friday. It also trades at a discount with respect to the spot. Trading in options indicate that the stock may find it hard to move past the level of ₹190.
Strategy: Investors can consider the short strangle strategy. This is best suited when one expects a range-bound movement in the underlying stock. Traders can sell the ₹200-strike call and ₹170 put options, which closed at ₹2.3 and ₹1.4. This will entail an income of ₹7,400, which will be the maximum profit one can earn.
For that to happen, Crompton Graves has to settle between ₹200 and ₹170 at the time of expiry. As the maximum profit is the premium collected, we advise traders with high-risk appetite to consider this. The loss could be unlimited if Crompton Greaves slips below ₹166 or moves above ₹204.
Traders could exit from the position if the loss mounts to ₹2,400.
Follow-up: Hold the position in Aurobindo Pharma.
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