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Though the medium-term outlook is negative for the stock of Sun TV Network(₹279.6), in the short term it is expected to move in a narrow range. The stock finds an immediate resistance at ₹296 and the crucial one at ₹334. Sun TV has a major support at ₹258; a conclusive fall below that will drag the stock down to sub ₹200 level.
F&O pointers: The Sun TV July futures added about 1.6 lakh shares on Friday, most of which are on the long side. Thanks to the recent volatility, there was a sharp rise in trading volumes in select options. Concentration of open interest in the ₹300-strike indicates strong resistance at that level.
Strategy: Traders can consider a short strangle strategy on Sun TV. This can be initiated by selling a ₹300-call and a ₹240-put. They closed with a premium of ₹6 and ₹2, respectively. This strategy will ensure an initial inflow of ₹4,000. If Sun TV settles between ₹240 and ₹300 at the time of expiry (July 31), then ₹4,000 will be the maximum profit one can earn under the strategy.
However, the strategy has the potential to leave investors with unlimited losses. A close above ₹308 or below ₹231 will start affecting the traders. Consider exiting from the position if the loss mounts to ₹2,000.
Follow-up: Hold Biocon till expiry
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