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B. Venkatesh

THE following strategies are based on Wednesday's trading in the derivatives segment on the NSE. The strategies are constructed to take advantage of short-term reversals in the futures price. The position has to be traded with protective stops to control the downside risk. The recommendation is typically valid for two days from the date of initiation. However, given the high volatility in the market at present, it may be better not to carry the position overnight. The target levels have accordingly being placed closer to the recommended entry price.

HDFC Bank: Buy March futures if it trades above 527 on Thursday. The upside target range is 534-537. Initiate the position with protective stop at 521. The margin on the futures position is approximately 16 per cent of the contract value. The minimum order size is 800 units. The current open interest position as a percentage of the market-wide limit is about 20 per cent.

Those with a longer horizon can buy March futures after it trades above 550. The upside target is 574. Note that the protective stop remains at 520, which is very far away from the recommended entry level. The position has to be traded with trailing stops to control the downside risk. No alternative strategies are available, as options on the stock are not actively traded.

Bharat Electronics: Buy March futures if it trades above 658 on Thursday. The upside target range is 666-669. Initiate the position with protective stop at 652. The margin on the futures position is approximately 17 per cent of the contract value. The minimum order size is 550 units. The open interest position as a percentage of the market-wide limit is around 5 per cent.

Those with longer horizon can consider buying March futures after it trades above 678. The upside target is 709. The protective stop, however, remains at 652. The position has to be traded with trailing stops to control the downside risk. 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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