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B. Venkatesh

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

Maruti Udyog: The stock closed at Rs 462 in the spot market. The outlook may turn positive if the stock trades above Rs 468. In the event, it could move to Rs 485.

Buy March futures after the stock trades above Rs 468 in the spot market. Initiate the position with spot-market-stop-loss at Rs 458. The position has to be traded with trailing stops to control the downside risk. The margin on the futures position is approximately 16 per cent of the contract value. The minimum order size is 400 units.

Traders can alternatively set up bull call spread. This position can be initiated with one long March 470 calls and one short March 500 calls. Note that near at-the-money strike has been preferred for the long call-leg because options are not trading rich. The spread can be set up for 8 points. The position will payoff 8 points net if the stock reaches the upside price target before March 10.

HDFC Bank: The stock closed at Rs 577 in the spot market. The outlook may turn positive if the stock trades above Rs 582. In the event, it could move to Rs 597.

Buy March futures after the stock moves above Rs 582 in the spot market. Initiate the position with spot-market-stop-loss at Rs 570. Note that the initial protective stop is far away from the recommended entry price. This makes the payoff unattractive. Traders can alternatively place a protective stop at the day's low at the time the position is initiated. Thereafter, the position has to be traded with trailing stops. Otherwise, the downside risk will be high, as the contract-multiplier is 800 units. The margin on the futures position is approximately 16 per cent of the contract value. No alternative strategies are available, as options on the stock are not actively traded.

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

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