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B. Venkatesh

THE following strategies are based on Wednesday's trading in the spot and the derivatives segment on the NSE.

SBI: The stock closed at Rs 493 in the spot market. The outlook appears positive. The upside price target is Rs 530.

Buy October futures. The farther-month contract trades at one-point premium to the spot price. Initiate the position with spot-market-stop-loss at Rs 482. The position has to be traded with trailing stop-loss to control the downside risk. The margin on the futures position is approximately 17 per cent of the contract value. The minimum order size is 500 units.

Traders can construct bull call-spread as an alternative strategy. This can be initiated with long September 490 calls and short September 500 calls. The spread can be set up for a net debit of 4 points. Note that the spread should be set up to work for a near-term price target of Rs 505 because the options expire in 6 days. The spread will deliver 8 points if the stock reaches Rs 505 on option expiration. The position does not provide any volatility capture because the long call is also trading rich.

Traders can also construct synthetic short based on October options. This can be initiated with long October 500 calls and short October 500 puts. The position should be set up for not more than 5 points. This position can be set up to work for the price target of Rs 530.

Grasim: The stock closed at Rs 1,153 in the spot market. The outlook appears negative. The downside price target is Rs 1,065.

Sell October futures. The farther-month contract trades at 9 points premium to the spot price. Initiate the position with spot-market-stop-loss at Rs 1172. The position has to be traded with trailing stop-loss. Otherwise, the upside risk will be high, as the contract-multiplier is 350 units. The margin on the futures position is approximately 18 per cent of the contract value. No alternative strategies are available, as options on the stock are not actively traded.

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