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

Consider buying the March futures on the stock. The near-month contract trades near the spot price. Initiate the position with stop-loss at Rs 303. This exposes the position to 8-point downside risk. The position has to be traded with trailing stop-loss. The margin is approximately 35 per cent of the contract value. The minimum order size is 1,200. The price target is valid for a 5-day period ending March 11.

Traders should note that initiating a long call position instead of long futures might not be optimal. The reason is that strike price of near-month 320 calls plus the premium is not far away from the upside price target. The implication is that the long calls will not be profitable if the stock reaches the upside price target at the end of the 5-day trading horizon. The open interest position as a percentage of the market-wide limit is about 30 per cent.

BPCL: The stock closed at Rs 480 in the spot market. The outlook could turn positive if the stock crosses Rs 502. In the event, the stock could move to Rs 532.

Consider buying the March futures if the stock crosses Rs 502 in the spot market. The position has to be traded with trailing stop-loss. Otherwise, the position will be subject to high downside risk because the contract-multiplier is 1,100. The margin on the long futures position is approximately 30 per cent of the contract value. The open interest position as a percentage of the market-wide limit is under 10 per cent. Traders should note that initiating long calls is not an available alternative because options on the stock are not actively traded.

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