Infosys (₹3,559): The long and medium-term outlook remains positive for Infosys.

However, in the short-term, we expect the stock to move in a sideways range.

The stock finds immediate support at ₹3,570 and a close below this level will drag the stock towards ₹3,490, which is a crucial level.

The long-term outlook will remain positive for Infosys as long it stays above ₹3,295. In that event, Infosys has the potential to reach ₹4,390.

F&O pointers: As usual, Infosys futures witnessed a moderate rollover of open interests. Infosys futures witnessed a rollover of 17 per cent to February series. Option trading indicates ₹3,650 will act as a strong support.

Strategy: Traders can consider a short-strangle on Infosys. Short-strangle, which involves simultaneous selling of call and put options, is best suited when the underlying stock is expected to move in a narrow range.

Here the strategy can be imitated by using February option contracts. Traders can consider selling 3,850-call option and 3,500-put option.

They closed with a premium of ₹57 and ₹15 respectively. This means, traders will get an initial income of ₹9,000, which will be the maximum profit they can earn.

This strategy is for traders who can take the risk and understand the concept, as loss could be huge.

For maximum profit, Infosys has to settle between the strike price at the time of expiry. However, if Infosys breaks free in any one of the directions, that is, either up or down, then this strategy will result in a huge loss. Any close above ₹3,925 or below ₹3,475 will reduce the profit.

We advise traders to exit from this strategy, if loss exceeds ₹2,500. Traders will have to pay margin money to pursue this short-strangle strategy.

Follow-up: Last week, we had advised traders to go for short-strangle on Ranbaxy.

The stock, which was moving on expected lines in the first four days, slumped sharply on Friday, leaving investors in deep red. The sudden sharp fall did not give traders any exit opportunity.

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