The Hindu Business Line : BoB: Long position will pay off after price breakout

M&M: The stock closed at Rs 453 in the spot market. The outlook appears positive but the upside will be confirmed if the stock moves above Rs 458. In the event, it will move to Rs 466 and then to Rs 479.

Buy October futures after the stock moves above Rs 459 in the spot market. Traders who initiate the position for a price target of Rs 466 can place a spot-market-stop-loss at Rs 451.

If this risk-return trade-off is not very comfortable, traders can alternatively place a stop at the low for the day on which the position is initiated.

Those initiating the position for a price target of Rs 479 have to place a spot-market-stop-loss at Rs 444.

The margin on the futures position is approximately 17 per cent of the contract value. The minimum order size is 625 units.

Traders can construct a bull call-spread as an alternative strategy.

This position can be initiated with the long October 450 calls and short October 470 calls. The spread can be set up for a net debit of 8 points.

Note that the spread should be set up to work for a price target of Rs 479.

The payoff will be better if the stock reaches the price target at or near option expiration. The reason is that the short call will then be theta-positive while the long call will not sensitive to time decay.

Bank of Baroda: The stock closed at Rs 172 in the spot market. The outlook appears positive but the stock will gather speed only if breaks above Rs 176.50. In the event, the stock could move to Rs 183 and then to Rs 187.

Buy October futures after the stock moves past Rs 176.50 in the spot market.

Initiate the position with spot-market-stop-loss at Rs 172. The position has to be traded with trailing stop-loss to control the downside risk.

The margin on the futures position is approximately 22 per cent of the contract value.

The minimum order size is 1,400 units.

No alternative strategies are available, as options on the stock are not actively traded.

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