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B. Venkatesh

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

Maruti Udyog: The March futures contract closed at 463.50. The outlook could turn positive if the futures contract trades above 466.50. In the event, it could move to 487.

Buy March futures after it moves above 466.50. Initiate the position with a protective stop at 460. 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 400 units.

Traders can alternatively construct ratio call spread. This position can be initiated with one long March 460 calls and two short March 500 calls. This spread can be set up for nine points debit. The position would payoff 20 points if the stock reaches the upside target within seven trading days.

The payoff will be better if the stock reaches the target at or near expiration, as the spread will benefit from time decay. Moreover, the spread will not suffer much from vega risk because the long call will be deep in-the-money if the underlying reaches the price target. Note that the spread's payoff is based on the underlying moving to Rs 487, which is also the target for the futures contract.

BHEL: The March futures contract closed at 834. The outlook could turn positive if the futures contract trades above 838. In the event, it could move to 870.

Buy March futures after it moves above 838. Initiate the position with protective stop at 828. The stop can be alternatively placed at the day's low at the time the position is initiated. 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 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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