Financial Daily from THE HINDU group of publications
Friday, Mar 25, 2005
Financial Daily from THE HINDU group of publications Friday, Mar 25, 2005 |
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Markets
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Derivatives Markets Columns - On the hedge Short reversal likely in Tata Steel, ONGC B. Venkatesh
THE following strategies are based on Thursday's trading in the derivatives segment on the NSE. Tata Steel: The March futures contract closed at 417. The outlook may turn positive if the near-month contract trades above 418. The upside target is 428. Buy March futures if it trades above 418. Initiate the position with protective stop at 406. 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 1,350 units. Traders can alternatively construct long time spread. This position can be initiated with one long April 420 calls and one short March 420 calls. The spread can be set up for 13-15 points net debit. The payoff will be optimal if the underlying moves to the price target just after the expiry of the March contract. The options can be set up to work for a target range of Rs 428-440. The risk is that the net payoff will be negative if the underlying reaches the lower price target before the expiry of the March contract. ONGC: The March futures contract closed at 857. The outlook may turn positive if the near-month contract trades above 864. The upside target is 880. Buy March futures if it trades above 864. Initiate the position with protective stop at 847. 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 300 units. It is not optimal to set up a time spread or farther-month call spread because April options are trading rich. The payoff will be negative if the underlying moves to the price target of Rs 875 in quick time. (The opinion expressed in this column is based on technical analysis. There is risk of loss in trading.)
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