The Hindu Business Line : Negative outlook for Maruti

Maruti Udyog: The stock closed at Rs 365 in the spot market. The outlook could turn negative if the stock trades below Rs 364. The downside price target is Rs 340.

Sell October futures after the stock moves below Rs 364. Initiate the position with spot-market-stop-loss at Rs 373. The position has to be traded with trailing stop-loss to control the upside risk. The margin on the futures position is approximately 17 per cent of the contract value. The minimum order size is 400 units.

Traders can also construct bear put-spread as alternative strategy. This position can be initiated with long November 360 puts and short November 340 puts. The spread can be set up for 4 points. The payoff will not be hurt due to time decay. The reason is that the long put will be insensitive to theta while the short put will be theta-positive when the stock reaches the downside price target. The spread will generate 12-14 points if the stock reaches the price target.

Those who hold the underlying can sell the November 380 calls against the stock. This strategy will fetch 6-7 points. Note that this is an income-enhancing strategy and not a hedge.

HCL Technologies: The stock closed at Rs 370 in the spot market. The outlook could turn positive after the stock moves above Rs 373. The upside price target is Rs 398.

Buy November futures after the stock moves above Rs 373 in the spot market. Initiate the position with spot-market-stop-loss at Rs 366. The position has to be traded with trailing stop-loss. Otherwise, the downside risk will be high, as the contract-multiplier is 1,300 units. The margin on the futures position is approximately 17 per cent of the contract value. Alternative strategies are not available, as options on the stock are not actively traded.

(Note: The opinion expressed in this column is based on technical analysis. There is risk of loss in trading.)

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