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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:

SCI: The stock closed at Rs 164 in the spot market. The outlook appears positive. The near-term upside target is Rs 170.

Buy November futures after the stock moves above Rs 165 in the spot market. Initiate the position with spot-market-stop-loss at Rs 162. The position has to be traded with trailing stops 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 1,600 units.

Traders can construct ratio vertical spread as alternative strategy. This position can be initiated with one long November 160 calls and two short November 170 calls. The spread can be set up for less than two points. A ratio spread gains from time decay. It is optimal to set up such a spread on SCI because the underlying volatility is low. The spread will generate five points if the stock reaches the upside price target before five trading sessions.

Hero Honda: The stock closed at Rs 442 in the spot market. The outlook remains negative. The downside price target is Rs 424.

Sell November futures after the stock moves below Rs 431 in the spot market. Initiate the position with spot-market-stop-loss at Rs 443. Trades can alternatively place a protective stop at the day's low at the time the position is initiated. The position is best traded with trailing stops 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.

Alternative strategies are not available, as options on the stock are not actively traded. Traders can, however, sell November 450 calls against the underlying. This strategy will fetch 6 points per option. Note that the covered call-write is not a hedge but just an income-enhancing strategy.

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

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