Consider calendar bull call spread on Tata Motors

 

Though the long-term outlook remains negative for Tata Motors (₹151.3), in the short term, it may remain firm.

The stock finds immediate support at ₹129 and a close below that could trigger another bout of selling and that could drag the stock lower to ₹104.

 

An immediate resistance appears at ₹165 and a major one at ₹182. A close above the latter will change the medium-term outlook to positive.

F&O pointers: Despite the stock trading volatile on Friday, Tata Motors February futures added over 5 per cent in open interests, which indicates strong buying at lower levels.

Option trading indicates a range of ₹140-₹180 for Tata Motors.

Strategy: Consider a calendar bull call spread on Tata Motors.

This can be initiated by selling the current month ₹150-call and simultaneously buying the same strike call of March month series.

They closed with a premium of ₹8.75 and ₹11.35 respectively.

This would entail an initial outflow of ₹ 2.6 a contract that works out to ₹5,200, as the market lot is 2,000 shares per contract.

Hold the positions till expiry of March contracts as the loss could be the premium paid.

Risk-averse investors can book profits as per their profile.

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