The Hindu Business Line : Short-term price reversal likely in ICICI Bank

Sell November after the stock trades below Rs 334 in the spot market. Initiate the position with spot-market-stop-loss at Rs 338. The position has to be 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 1,400 units. Note that this strategy is valid for only two trading sessions from the date of initiation. If profits are not taken or the position is not stopped within this period, the futures contract has to be closed.

It is generally sub-optimal to initiate the options position for such a short trading horizon. In this case, however, setting up such a position might be beneficial because of the time decay effect (the options have just 7 days to expiration).

Traders can, hence, construct a synthetic short position. This can be initiated with long November 330 puts and short November 330 calls. The position can be set up for a net credit of 4 to 5 points. The position will generate 8 points if the stock reaches the price target in 3 sessions. Note that the position will be exposed to high upside risk, just as a short underlying.

IOC: The stock closed at Rs 461 in the spot market. The outlook could turn positive if the stock moves above Rs 462. The upside price target is Rs 478.

Buy December futures after the stock moves above Rs 462 in the spot market. Initiate the position with spot-market-stop-loss at Rs 457. The position has to be traded with trailing stops 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 possible, 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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