NTPC (Rs 149): The long-term outlook for NTPC remains negative. However, in the short-term, it is likely to move in a narrow range. It finds near-term resistance at Rs 154 and support at Rs 143 and the next one at Rs 138. A close above the resistance has the potential to lift the stock towards Rs 166.
F&O pointers: NTPC witnessed accumulation of short positions on Friday. Options are not that active. However, a little cue available indicates a neutral view on NTPC as both call and put of 150 strike witnessed unwinding of open interest positions.
Strategy: Consider short straddle on NTPC. This can be initiated by selling 150 strike of both call and put. While the call closed at Rs 2.65, the same strike put closed at Rs 3.05.
Short straddle strategy is best suited when one expects narrow movement of the underlying. While this strategy entails only a limited profit to the extent of premium collected, loss could be unlimited if NTPC swings wildly in any one of the directions, i.e., either up or down.
Maximum profit occurs if NTPC closes at Rs 150 at the time of expiry. In that event, the profit would be about Rs 11,400. Traders are advised to consider this strategy till expiry. The position will start pinching traders if NTPC moves above Rs 155 or closes below Rs 144.
Follow-up: Last week, we advised traders to consider a short on IndusInd Bank. As the counter surged strongly, we advise traders to exit immediately.
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