The Hindu Business Line : Oriental Bank: Outlook positive, buy July futures

Oriental Bank: The stock closed at Rs 247 in the spot market. The outlook appears positive. The upside price target is Rs 260. If the stock trades above this level, it could drift to Rs 286.

Buy July futures. The near-month contract trades on par with the spot price. Initiate the position with spot-market-stop-loss at Rs 233. This exposes the position to high downside risk, as the contract-multiplier is 1,200 units. The position has to be, hence, traded with trailing stop-loss. Cautious traders can buy the July futures after the stock trades above Rs 251 in the spot market. The spot-market-stop-loss should then be Rs 242. The margin on the futures position is approximately a third of the contract value. No alternative strategies are available, as options on the stock are not actively traded.

Tata Tea: The stock closed at Rs 393 in the spot market. The outlook appears positive. The upside price target is Rs 410. This can be upgraded to Rs 420 if the stock trades above that level.

Buy July futures. The near-month contract trades on par with the spot price. Initiate the position with spot-market-stop-loss at Rs 375. The recommended outlook will be negated if the stock trades below this level. The position has to be traded with trailing stop-loss to control the downside risk. The margin on the futures position is approximately 18 per cent of the contract value. The minimum order size is 550 units.

Traders can set up a long call butterfly as an alternative strategy. There is, however, a risk of not completing the 3-leg butterfly spread because of lack of active strikes. The recommended strikes are one long July 400 calls, two short July 410 calls and one long July 420 calls. The position should be set up for net debit of not more than 3 to 4 points. The position will yield maximum profits if the stock trades at Rs 410. The stock should reach the upside price target in quick time. Otherwise, the position will lose value due to time decay.

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