Future Perfect: Consider put on LIC Housing

The long-term outlook for the stock of LIC Housing Finance (₹495.4) appears positive, though it may be under pressure over the the short to and medium-term.

The stock finds an immediate resistance at ₹545 and support at ₹470. If LIC Housing Finance fails to sustain above the support, it could drop to ₹402. On the other hand, a conclusive close above ₹544 will change the short-term outlook to positive and take the stock higher to ₹670.

F&O pointers: The LIC Housing Finance futures added a little over one lakh shares on Friday. Option trading indicates a movement in the ₹480-520 range.

Strategy: Traders can consider buying ₹490-put option. The option closed with a premium of ₹9.55. As the market lot is 1,100 shares, one has to shell out ₹10,505 to enter this strategy.

The premium paid initially (₹10,505) would be the maximum loss one can suffer from this position.

That will happen if LIC Housing Finance manages to stay at or above ₹490. But a stay below ₹480.45 will turn the position positive.

We expect the stock to remain weak in the short term.

Traders can exit from the position if the loss mounts to ₹6,500 or at a profit of ₹10,000. Consider holding the position for at least two weeks.

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