The Hindu Business Line : Outlook may turn positive for Maruti, Tata Tea

Maruti Udyog: The June futures contract closed at 435.50. The outlook may turn positive if the June contract trades above 445. The upside target is 467-470.

Buy June futures after it trades above 445. Initiate the position with protective stop at 435. Trail the stop to control the downside risk.

The margin on the futures position is approximately 16 per cent of the contract value.

The minimum order size is 800 units. The open interest position is about 20 per cent of the market-wide limit.

Traders can alternatively construct bull call spread. This position can be initiated with long June 440 calls and short June 470 calls. The spread can be set up for a net debit of 7-8 points.

The position could payoff 13-15 points net if the underlying moves to the price target within 7 trading sessions.

Note that it is not optimal to set up ratio spreads because the short calls' gamma will lower payoffs if the underlying reaches the price target in quick time.

Tata Tea: The June futures contract closed at 587.50. The outlook may turn positive if the June contract trades above 589. The upside target is 608-610.

Buy June futures after it trades above 589.

Initiate the position with protective stop at 578. Trail the stop to control the downside risk. The margin on the futures position is approximately 15 per cent of the contract value.

The minimum order size is 550 units.

Alternative strategies cannot be set up, as options on the stock are not actively traded. The open interest position is about 20 per cent of the market-wide limit.

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

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