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B. Venkatesh

THE following strategies are based on Monday's trading in the spot and the derivatives segment on the NSE:

BHEL: The stock closed at Rs 711 in the spot market. The outlook may turn positive if the stock trades above Rs 728. In the event, it could move to Rs 760.

Buy January futures after the stock moves above Rs 728 in the spot market. Initiate the position with spot-market-stop-loss at Rs 711. 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.

Traders with a shorter trading horizon can initiate long futures position after the stock moves above Rs 705 in the spot market. The initial protective stop should be placed at Rs 695 (spot price). The position should be set up to work for a target of Rs 728. This strategy is valid for just three trading sessions from the date of initiation. If profits are not taken or the position is not closed, the contract has to be closed at the end of this period.

Hero Honda: The stock closed at Rs 522 in the spot market. The outlook may turn positive if the stock trades above Rs 535. The upside price target is Rs 571.

Buy January futures after the stock moves above Rs 535 in the spot market. Initiate the position with spot-market-stop-loss at Rs 522. The position has to be traded with trailing stops to control the downside risk. The margin on the futures position is approximately 20 per cent of the contract value. The minimum order size is 400 units.

Traders can construct ratio call spread as alternative strategy. This position can be initiated with one long January 540 calls and two short January 580 calls. The spread can be set up for a net debit of 4 points. The spread will payoff about 25 points if the stock moves to the upside price target before option expiration.

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

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