The Hindu Business Line : Outlook may turn positive for SCI

SCI: The stock closed at Rs 171 in the spot market. The outlook could turn positive if the stock moves above Rs 173. The upside price target would then be Rs 182.

Buy December futures after the stock moves above Rs 173 in the spot market. Initiate the position with spot-market-stop-loss at Rs 168. 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 1,600 units.

Traders can alternatively set up a ratio call spread to take advantage of a likely uptrend in the underlying. This position can be initiated with one long December 175 calls, one short December 180 calls and one short December 185 calls. This will be a zero cost spread. The position will generate 5 points if the stock reaches the upside price target on option expiration. It would be best to close the position if the stock moves above the price target. Otherwise, the spread will turn unattractive because the two short calls will work against the position.

Tata Power: The stock may see a short-term price reversal. Sell December futures after the stock moves below Rs 387 in the spot market. The downside price target is Rs 376. Initiate the position with spot-market-stop-loss at Rs 389 or at the day's low at the time the position is initiated, whichever is lower. The position has to be traded with trailing stops to control the upside risk. The futures position has to be closed at the end of three days if the contract is not stopped or profits are not taken within this period. The margin on the futures position is approximately 17 per cent of the contract value. The minimum order size is 800 units.

Traders can construct synthetic short as alternative strategy. This position can be initiated with long December 380 puts and short December 380 calls. The position can be set up for a net credit of 5 points. The synthetic short will generate 9 points if the stock moves to the downside price target within the trading horizon. The position should be closed if the stock moves above Rs 390. In the event, the loss would be 5 points.

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

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