HDIL (Rs 82): The outlook remains neutral for Housing Development and Infrastructure Ltd despite a strong recovery from its life-time low. The stock had touched an all-time low of Rs 52 in early this year. HDIL is expected to move in a narrow range between Rs 110 and Rs 60 in the medium-term. However, in the short-term, it is expected to move in Rs 95-70 range.
F&O pointers: The HDIL futures are trading without any premium. In fact, the farther month futures — September and October — are trailing current month contract even at the start of new series.
The HDIL August futures witnessed of marginal accumulation of open position on the short side. Option trading indicates Rs 85 would act as a strong resistance.
Strategy: Traders can consider short strangle on HDIL using 75 put and 90 call. They closed at a premium of Rs 1.50 each on Friday.
Short-strangle is best when one expects the underlying stock to move in a narrow range.
Maximum profit is the premium collected, which works out to nearly Rs 12,000 in this strategy as the market lot is 4,000 units per contract.
On the other hand, the loss could be unlimited if HDIL moves out of the aforesaid range. Loss will start to mount if HDIL closes above Rs 92 or below Rs 73.
Reliance Capital (Rs 335): Outlook for Reliance Capital also remains neutral. While in the medium-term it is expected to move in Rs 390-290 range, in the short-term, Reliance Capital is likely to move in the Rs 360-320 range.
F&O pointers: The Reliance Capital futures added fresh short positions on Friday. The August futures closed on par with the spot price.
This indicates that traders are not willing to bet on the counter. Options are not that active.
Cues from option trading indicate a neutral range for the stock.
Strategy: Consider short-strangle using 360 call and 320 put on Reliance Capital. They closed at Rs 8 and Rs 5 respectively. This will entail a net flow of Rs 26,000, which could be the maximum profit one can earn.
The market lot is 500 units/contract. Loss would be unlimited in this strategy.
Traders will face the pressure if Reliance Capital moves above Rs 373 or below Rs 307.
Note: Both these counters are high beta, which means they will swing wildly in correlation to Nifty movements. So the strategies are strictly for traders who can bear high risk.
Follow-up: Last week we advised a short-strangle on Maruti Suzuki using 1,050 put and 1,200 call.
The position still remains positive. Traders can continue to hold to gain the maximum.
(Note: Feedback or queries (on positions) may be sent to firstname.lastname@example.org by Sunday noon. Replies will be published on Monday.)