Maruti Suzuki (Rs 1,110.65): The long-term outlook remains negative for Maruti Suzuki. However, in the short-term, it might move in a narrow band between Rs 1,075-1215. Key support and resistance are placed at Rs 1,005 and Rs 1,330 respectively. Only a break from this range will set a clear direction for Maruti. A close below Rs 1,005 will trigger a fresh fall. In that event, the stock could collapse towards Rs 830. On the other hand, a conclusive close above Rs 1,330 will make that level a strong support for a future rally.
F&O pointers: Maruti Suzuki witnessed a low rollover of just 67 per cent to August series against 89 per cent witnessed last month. The Maruti August futures is trading in discount at Rs 1,104 with respect to the spot close of Rs 1,112.9. It saw unwinding of long positions on Friday, indicating lack of traders' interest to carry forward their position even at the start of new series. Both puts and calls witnessed accumulation of open interest, indicating a neutral view. However, higher accumulation in near calls is marginally negative.
Strategy: Traders could consider short strangle on Maruti Suzuki using 1,050 put and 1,200 call. They closed with a premium of Rs 20.1 and Rs 11.75 respectively.
Short strangle is best when one expects the underlying stock to move in a narrow range. Maximum profit is the premium collected, which works nearly Rs 8,000. On the other hand, loss could be unlimited if Maruti moves out of the aforesaid range. Besides, writing option involves higher margin commitments. This strategy is suggested only for traders who can withstand wild swings and can hold it for at least three weeks.
Loss will start mounting if Maruti closes above Rs 1,235 or below Rs 1,015. Market lot is 250 units a contract.
Follow-up: Last week, we had advised shorting Educomp Solutions and SAIL. Both counters moved on expected lines. Traders could consider exiting Educomp Solutions and holding SAIL short futures with a revised stop-loss of Rs 87 (Spot price on closing day basis).
(Note: Feedback or queries (on positions) may be sent to firstname.lastname@example.org by Sunday noon. Replies will be published on Monday.)