Future Perfect: Short strangle on DHFL

The outlook for Dewan Housing Finance Corporation (₹547.5) is positive, as long as it stays above ₹457. Immediate support is at ₹500 and resistance at ₹582. A close above ₹600 will trigger a fresh rally to new heights . If the current trend sustains, DHFL can target ₹800.

F&O pointers: The DHFL April counter shed 9.34 lakh shares in open interest, despite the underlying stock witnessing a gain of 3.5per cent. Of late, traders have preferred to book profits in the counter.

 

 

 

This signals that the stock could have only limited upside. Among the options, ₹520-put and ₹560-call saw huge accumulation of open position.

Strategy: Traders can consider a short strangle, which can be initiated by selling ₹600-strike call and ₹500-strike put. Both the options ended with a premium of ₹2.90, which means one will receive ₹8,700 as the market lot is 1,500 shares. This would be the maximum profit one can earn if DHFL trades between the strike prices at the time of expiry.

However, loss could be unlimited if the stock trends below ₹495 or above ₹605 . This strategy is for traders who can withstand the risk and have deep pockets. Also, selling options would require margin commitments.

Follow-up: Traders can hold the MCX futures with a stop loss of ₹736 (on closing day basis).

 

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