The Hindu Business Line : BoB: Outlook positive, buy March futures

Consider buying March futures on the stock. The farther month contract trades at a one-point discount to the spot, and at a 2-point discount to the near month contract. Initiate the position with sell stop at Rs 236. This will expose the long futures position to 9-point downside. The position has to be traded with trailing sell stops. The reason is that the position cannot be hedged with puts, as options on the stock are not actively traded.

Note that the underlying volatility has been high in recent times. Trading the position with tight sell stops may be sub-optimal, because the stock could well trigger the loss limit and then bounce back. The margin on the futures position is approximately 30 per cent of the contract value. The minimum order size is 1,400.

i-Flex Solutions: The stock closed at Rs 648 in the spot market. The near-term outlook appears positive. The upside price target is Rs 740.

Consider buying the February futures, when the stock declines to around Rs 630 level in the spot market. Initiate the position with sell-stop 10-15 points away from the acquisition price. Thereafter, the position has to be traded with trailing sell stops.

Note that a tight sell stop may be sub-optimal because the underlying volatility has been high in recent times. The downside risk cannot be hedged away with puts because options on the stock are not actively traded.

The margin on the futures position is approximately 20 per cent of the contract value. The minimum order size is 600.

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