The outlook for the stock of L&T Finance Holdings (₹140) has turned neutral. Only a close above ₹165 will change the outlook to positive.
Given the current volatility in the market, the stock could move wildly. Ruling at a crucial level, the stock finds a strong support at ₹135.
A conclusive close below that level could weaken it towards ₹108. However, we expect the stock to move in a narrow range around the current level with a negative bias.
F&O pointers: L&T Finance Holdings contract witnessed heavy shedding of open positions on Friday alone with a huge fall in share price. In all, 38.50 lakh shares or 9.19 per cent were squared-off, signalling panic in the market. Trading in options indicates that it could move in ₹120-170 range.
Strategy: This strategy is only for traders with a high-risk appetite. We advice them to consider a short-strangle on L&T Finance Holdings by selling ₹125-strike put and ₹155-strike call. They closed with premiums of ₹1.45 and ₹0.60 respectively.
The maximum profit is the premium earned, which works out to ₹9,225, as the market lot for L&T Finance Holdings futures is 4,500 shares. For that to happen, the stock has to settle between the strike prices.
However, loss can be unlimited if L&T Finance Holdings swings wildly in either direction — up or down. A close above ₹157 or below ₹123 will start hurting the position. Though it could see a wild swing during intra-day movements, we expect the stock to settle in the range. Only those who can withstand the swings should only consider this strategy.
Follow-up: Those who have not booked profit in Hindustan Unilever can hold the position (₹1640-call) as recommended.
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