The long-term outlook remains positive for the stock of Arvind, as long as it stays above ₹309. However, in the short term, the stock is likely to move in a narrow range with negative bias. Immediate resistance is at ₹413 and support is at ₹368. A close below the latter will drag the stock towards ₹330. On the other hand, a conclusive close above ₹413 will reconfirm the positive outlook for the stock, which will help it scale new heights.
F&O pointers: The counter witnessed a rollover of just about 8 per cent to March series. This signals that not many traders are willing to carry over their positions and have preferred to book profits. Options are not very active. However, option trading cues indicate that Arvind could move in a range of ₹360-420.
Strategy: We advice a calender put spread strategy for traders. This can be initiated by buying 380-put of March series and simultaneously selling the current month same strike of Arvind. These options closed with a premium of ₹12.40 and ₹3.35, respectively. That means, one has to fork out ₹18,100 to adopt the strategy, as the market lot is 2,000 shares.
The maximum loss one can suffer in this strategy is the premium paid (₹18,100), which can happen if the stock rises sharply and closes above ₹390. On the other hand, profit potential is very high if Arvind manages to slip below the break even point of ₹370 at the time of expiry.
Follow-up: Though Sun TV hit our expected target in the latter part of the week, it also triggered stop loss. Those holding can book profits.
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