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B. Venkatesh

THE following strategies are based on Friday's trading in the derivatives segment on the NSE:

M&M: The March futures contract closed at 537. The outlook appears positive. Buy the near-month contract. The upside target is 560. Initiate the position with protective stop at 530. 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 625 units. No alternative strategies are available, as options on the stock are not actively traded.

Infosys: The March futures contract closed at 2,220. The outlook appears positive. Buy the near-month contract. The upside target is 2,275. Initiate the position with protective stop at 2,206.

Trail the stop 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 200 units.

Traders can alternatively consider constructing ratio call spread. This position can be initiated with one long March 2,220 calls and two short March 2,280 calls. The spread can be set up for a net debit of not more than 2 points. The position could payoff 8 points if the stock reaches the price target in 5-6 trading sessions.

Note that the payoff on the options position is based on the price target of Rs 2,285 for the underlying, which is different from the target for the futures.

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

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