The Hindu Business Line : Outlook may turn positive for Reliance, ACC

Reliance Industries: The stock closed at Rs 536 in the spot market. The outlook may turn positive if the stock moves above Rs 538. In the event, the stock could move to Rs 553.

Buy February futures after the stock moves above Rs 538 in the spot market. Initiate the position with spot-market-stop-loss at Rs 529. 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 can construct ratio call spread as alternative strategy. This position can be initiated with one long February 540 calls and two short February 560 calls. The spread can be set up at zero cost. The position would payoff 10 points if the stock reaches the price target before the contracts expire next Thursday.

ACC: The stock closed at Rs 367 in the spot market. The outlook may turn positive if the stock moves above Rs 369. In the event, the stock could move to Rs 386.

Buy March futures after the stock moves above Rs 369 in the spot market. Initiate the position with spot-market-stop-loss at Rs 360. The position has to be traded with trailing stops. Otherwise, the downside risk will be high, as the contract-multiplier is 1,500 units. The margin on the futures position is approximately 17 per cent of the contract value.

Traders can alternatively construct a long time spread. This position can be initiated with one long March 370 calls and one short February 370 calls. The spread can be set up for a net debit of 10 points. The payoff will be better if the stock reaches the price target just after the expiry of the near-month contract. The reason is that the spread benefits from time decay. The position will be worth zero or marginally less if the stock reaches the price target before the expiry of the near-month contract. The position would payoff 10-15 points if the stock reaches the price target in March.

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

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