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B. Venkatesh

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

TCS: Sell August futures if it trades below 1,323. The downside target is 1,318-1,313. Place the protective stop at 1,330. The open interest position is about 20 per cent of the market-wide limit. The minimum order size is 250 units.

Maharashtra Seamless: Sell August futures if it trades below 484. The downside target is 480-477. Place the protective stop at 489.

The open interest position is about 15 per cent of the market-wide limit. The minimum order size is 600 units.

i-flex Solution: Sell August futures if it trades below 1,050. The downside target is 1,039-1,028. Place the protective stop at 1,062. The open interest position is about 50 per cent of the market-wide limit. The minimum order size is 300 units.

Note that all the above-mentioned positions are intra-day trades. If the futures price gaps down on Thursday to trade 2-3 points below the recommended entry price, traders should enter the short position after the price breaks below the 5-minute low.

If the futures price gaps up and then triggers the recommended entry level, the protective stop should be placed at the day's high at the time the position is initiated, if that price is higher than the stop-loss level recommended above.

Option-based strategies on these positions will not be optimal because the price targets are not far away from the recommended entry levels.

Position trade: Tata Motor's August futures closed at 483.80. Buy the August contract if it trades above 483. The upside target is 517-520. Initiate the position with protective stop at 489. The margin on the futures position is approximately 15 per cent of the contract value. The open interest position is about 15 per cent of the market-wide limit. The minimum order size is 825 units.

Traders can alternatively construct bull call spread. This position can be initiated with long August 490 calls and short August 520 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 stock reaches the price target on or before 7 trading sessions.

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

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