I have written 2 calls of Nifty 5300-strike July series at Rs 90. Please suggest strategy. - Rajesh Dalvi, Mumbai

Nifty: Despite a strong show in recent weeks, the outlook still remains muted for Nifty. It is likely to move in the range of 5430 on the upper band and 4720 at the lower end. A close above 5430 could lift the Nifty to 5565 levels while the crucial resistance lies at 5610.

F&O pointers: Nifty witnessed a strong build up in long positions. This indicates that traders are willing to carry their position in anticipation of a rally. Option trading indicates a range of 5000-5400 for Nifty. Volatility index softened to sub-20 levels also augers well for longs.

Strategy: Better to exit your position. However, if you can afford to take a risk, hold with a stop-loss of 5420 for spot Nifty.

I have bought one lot Cairn India futures July futures at Rs 311. Please advise me a strategy. - Pradeep Motaparthy

Cairn India (Rs 309): The stock rules at a crucial level. A conclusive close below Rs 315-313 will change the long-term outlook negative. It finds immediate resistance Rs 338.

F&O pointers: The futures accumulated fresh shorts on Friday. Option trading indicates that it could hover around Rs 300.

Strategy: Exit and re-enter once it takes a clear direction.

I bought Ashok Leyland July 30-strike call options at an average price of Rs 0.175. Kindly suggest me exit levels. - P.Subramanian, Chennai.

Ashok Leyland (Rs 24): The outlook remains neutral with negative bias. The stock finds the crucial support at Rs 21.9 and the resistance at Rs 32. Only a conclusive close above Rs 32 will change the long-term outlook positive. On the other hand, a close below Rs 21.9 will trigger a fresh sell-off.

F&O pointers: Ashok Leyland futures added fresh short positions on Friday, despite decent gains. The futures closed in discount with respect to the spot close. Options are not that active.

Strategy: Your position will start making profits only if Ashok Leyland moves up quickly. Otherwise, it will remain under pressure. It is better to exit your positions, given the illiquid nature of Ashok Leyland options.

PowerGrid has moved within the range of Rs 100 on lower side and Rs 110 on upper side for last few months. Is there a prudent case to buy July 100 call and July 110 put as a sure shot case? - Pankaj Dhawan.

PowerGrid: The outlook remains neutral for Power Grid. It is likely to move in a range. It has been moving in the Rs 115-90 range for more than a year. Only a conclusive break from this range will set a clear direction for PowerGrid. It is likely to continue in that range. The stock is now very close to the resistance level. One has to wait and see whether this time around it has the potential to break barrier with volumes.

F&O pointers: The futures witnessed a long build-up. Options are not active.

Strategy: When one expects narrow movement, it is time to sell options. In this case, illiquidity may hamper option strategy.

Note: The analysis and opinion expressed in this column are based on F&O data available at this point of time and on technical analysis based on past price movements. There is risk of loss in trading.

Feedback may be sent to f&o@thehindu.co.in or blfuturesoptions@gmail.com

(This article was published on July 1, 2012)
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