The Hindu Business Line : Short turn likely in PNB, BoB

THE following strategies are based on Monday's trading in the spot and the derivatives segments on the NSE. These strategies are constructed to take advantage of short-term swings in the underlying.

Setting up such positions is, hence, risky because they may run counter to the primary trend. Money management in the form of protective stops is important. The recommendation is typically valid for two trading sessions. However, given the high underlying volatility, it is best that the traders do not carry their positions overnight.

PNB: The March futures closed at 472, after touching a high of 484. Sell the near-month contract if it trades below 482. The downside target is 457.

Initiate the position with protective stop at 485 or at the day's high at the time the position is initiated, whichever is higher. It may be best to trail the stop during the day to control the upside risk.

The margin on the futures position is approximately 20 per cent of the contract value. The minimum order size is 1,200 units.

It may not be optimal to set up options-based position because the target is not far away from the current level.

Note that the target and stops have been given on the futures price and not on the spot price. The reason is that the futures contract trades at a substantial discount to the spot price. The price movements between the two can, hence, be divergent.

BoB: The March futures closed at 239, after touching a high of 244. Sell the near-month contract if it trades below 241. The downside target is 232.

Initiate the position with protective stop at 245 or at the day's high at the time the position is initiated, whichever is higher. Trail the stop to control the upside risk. The margin on the futures position is approximately 19 per cent of the contract value.

The minimum order size is 1,400 units. 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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