Financial Daily from THE HINDU group of publications
Friday, Apr 08, 2005
Financial Daily from THE HINDU group of publications Friday, Apr 08, 2005 |
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Markets
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Derivatives Markets Columns - On the hedge Short reversal likely in ICICI Bank, Bajaj Auto B. Venkatesh
THE following strategies are based on Thursday's trading in the derivatives segment on the NSE. The strategies are constructed to take advantage of short reversals in futures prices. The position can run counter to the primary trend. Protective stops are, hence, important to control risk. If futures gap up so as to trade away from the recommended entry price, traders can initiate the position after the price breaks above the five minute high. The position should not be carried overnight because of the high volatility in the underlying. Options-based strategies are not optimal because the target levels are not far away from the recommended entry price. ICICI Bank: Buy April futures after it trades above 400. The upside target range is 407-409. Initiate the position with protective stop at 396. The margin on the futures position is approximately 17 per cent of the contract value. The minimum order size is 700 units. The open interest position as a percentage of the market-wide limit is about 18 per cent. Bajaj Auto: Buy April futures after it trades above 1,038. The upside target range is 1,049-1,052. Initiate the position with protective stop at 1,032. The margin on the futures position is approximately 16 per cent of the contract value. The minimum order size is 200 units. The open interest position as a percentage of the market-wide limit is about 7 per cent. (The opinion expressed in this column is based on technical analysis. There is risk of loss in trading.)
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