The Hindu Business Line : Outlook positive for BPCL, HCL Tech

BPCL: The stock closed at Rs 360 in the spot market. The outlook appears positive but the trend will be confirmed if the stock trades above Rs 370. The upside price target is Rs 384.

Buy June futures. The near-month contract trades at 2-point discount to the spot price. Initiate the position with spot-market-stop-loss at Rs 345. Cautious traders can consider buying the futures contract after the stock trades above Rs 370. In the event, the position should be traded with stop-loss at Rs 360.

The margin on the futures position is approximately 30 per cent of the contract value. The minimum order size is 550 units.

An alternative strategy would be to construct a vertical bull spread. This can be initiated with long June 360 calls and short June 380 calls.

The option can be set up for a net debit of not more than 7 points. The option would entail lower outlay because of the premium received on the short option. The volatility capture on the spread would depend on whether traders are willing to pay higher implied volatility for out-of-the-money options. The June 380 calls are not traded yet.

HCL Tech: The stock closed at Rs 311 in the spot market. The outlook appears positive. The upside price target is Rs 324.

Buy June futures. The near-month contract trades at 3-point discount to the spot price. The recommended strategy is optimal for an intra-day trade, as the upside target is not far away from the current market price. Besides, carrying the position overnight would be highly risky because the stock is likely to witness another leg of decline after moving up.

The recommended view will be negated if the stock trades below Rs 299. The futures position should be traded with a spot-market-stop-loss at Rs 306.

The margin on the futures position is approximately 25 per cent of the contract value. The minimum order size is 1,300 units. No alternative strategies are available because options on the stock are not actively traded.

More Stories on : Derivatives Markets | On the hedge

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Anand Rathi group opens office in Bangalore

ABN Amro MF lines up plain vanilla schemes

Bears prevail

Investment buying boosts Glenmark

Block deal spurs volumes

Outlook positive for BPCL, HCL Tech

Volumes tumble as dull trend continues

Plan to strengthen banking sector — 2nd action report to stock scam tabled in House