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B. Venkatesh

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

Hero Honda: The March futures contract closed at 569. The near-month futures could see a short reversal to the sharp rise on Monday. Sell the near-month contract if it trades below 575. Note that the entry price is higher than the closing price. The reason is that the futures price could gap up in early trades on Tuesday, following the pent-up demand during the latter half of Monday.

The downside target is 562. The initial protective stop should be placed at 582. The risk-return trade-off will be unattractive if the contract does not gap up but instead gaps down on Tuesday. Since the futures contract exhibited high volatility on Monday, it is better that the protective stop is not trailed during the day. This recommendation is typically valid for two trading sessions.

It is, however, better that traders do not carry their position overnight. The margin on the futures contract is approximately 33 per cent of the contract value. The minimum order size is 400 units. No alternative strategies are available, as options on the stock are not actively traded.

IOC: The March futures contract closed at 475. The outlook could turn positive if March futures contract trades above 480.50. In the event, it could move to 497.

Buy March futures after it moves above 480.50. Initiate the position with protective stop at 475. The position has to be traded with trailing stops to control the downside risk. The margin on the futures position is approximately 10 per cent of the contract value. The minimum order size is 600 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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