Thanks to a strong rally in Reliance Power’s stock (₹50.2) last week, the immediate term outlook is positive. While Reliance Power finds an immediate resistance at ₹54.10, a close above that level could lift the stock towards ₹60. The positive outlook of Reliance Power will get negated if the stock fails to sustain above ₹43.40. The long-term outlook will be positive only if the stock manages to close above ₹80.
F&O pointers: Though open interest almost doubled on Friday, RPower January futures shed open interest, signalling profit booking. Option trading indicates that the stock could move in the ₹50-₹55 range.
Strategy: Traders could consider a bull call spread on Reliance Power. This can be initiated by buying ₹50-strike call and simultaneously selling the ₹52.50-strike call. As the market lot is 13,000 shares per unit, this strategy will cost investors ₹12,350, which would be the maximum loss one could suffer. For that to happen, RPower has to settle at or close below ₹50. On the other hand, a profit of ₹20,150 is possible, if Reliance Power manages to close at or above ₹52.50. Consider quitting the position if the loss mounts to ₹8,500.
Follow-up: Consider holding Maruti Suzuki ₹9,600-put position.
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.