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B. Venkatesh

THE following strategies are based on Tuesday's trading in the spot and the derivatives segments on the NSE:

MTNL: The stock closed at Rs 135 in the spot market. The outlook appears positive but the upside will be confirmed if the stock breaks resistance at Rs 138. In the event, the stock could move to Rs 144 and then to Rs 155.

Buy July futures after the stock breaks Rs 138 in the spot market. Initiate the position with spot-market-stop-loss at Rs 132. The position has to be traded with trailing stop-loss to control the downside risk. The position can be traded intra-day, as the first price target is not far away from the current level. The margin on the futures position is approximately 26 per cent of the contract value. The minimum order size is 1,600 units. It is optimal to initiate option position. The reason is that even in-the-money-options will not be speedier than the futures position.

GAIL: The stock closed at Rs 173 in the spot market. The outlook appears positive but the uptrend will be confirmed if the stock trades above Rs 181. In the event, the stock could move to Rs 192.

Buy July futures if the stock cuts Rs 181 in the spot market. Initiate the position with spot-market-stop-loss at Rs 173. The position has to be traded with trailing stop-loss to control the downside risk. As with MTNL, the price target for GAIL is also near the current price level. The strategy is, hence, optimal for intra-day trade. Aggressive traders who prefer to set up a long futures position at the current level should trade with initial stop-loss at Rs 159. This level is far away from the current price level and exposes the position to high risk. The margin on the futures position is approximately 36 per cent of the contract value. It is not optimal to set up long option position or combinations thereof. The reason is that options trade rich and also suffer from high theta risk.

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