Financial Daily from THE HINDU group of publications
Tuesday, Nov 02, 2004
Financial Daily from THE HINDU group of publications Tuesday, Nov 02, 2004 |
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Markets
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Derivatives Markets Columns - On the hedge Outlook may turn positive for Reliance, BHEL B. Venkatesh
THE following strategies are based on Monday's trading in the spot and the derivatives segment on the NSE: Reliance Industries: The stock closed at Rs 529 in the spot market. The outlook could turn positive if the stock moves above Rs 535. The upside price target is Rs 554. Buy November futures after the stock moves above Rs 535 in the spot market. Initiate the position with spot-market-stop-loss at Rs 525. 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 600 units. Traders can construct bull call-spread as alternative strategy. This position can be initiated with long November 540 calls and short November 560 calls. The spread should be set up for a net debit of not more than 6 points. The position does not suffer much from time decay. The reason is that the long call will be insensitive to time decay when the stock reaches the upside price target. Besides, the short call will be theta-positive. Risk-averse traders should prefer options because the capital-at-risk is lower. BHEL: The stock closed at Rs 628 in the spot market. The outlook will turn positive if the stock moves above Rs 629. The upside price target is Rs 643. Buy November futures after the stock moves above Rs 629 in the spot market. Initiate the position with a spot-market-stop-loss at Rs 619. 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 600 units. No alternative strategies are 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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