B. Venkatesh

Chennai, April 12

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

HPCL: The April futures contract closed at 322.50. The outlook may turn negative if it trades below 317. The downside target range is 307-305.

Sell April futures after it trades below 317. Initiate the position with a protective stop at 326. Trail the stop to control the upside risk. The margin on the futures position is approximately 17 per cent of the contract value. The minimum order size is 650 units. The open interest position as a percentage of the market-wide limit is about 15 per cent.

Traders can alternatively construct a bear call spread. This position can be initiated with short April 320 calls and long April 340 calls. The spread can be set up for eight credit points. If the underlying reaches the target range within five trading days, the spread will payoff a net of 5-6 points. Note that the spread carries negative convexity. It is best to close the position if the stock moves above Rs 325.

HCL Tech: The April futures contract closed at 373. The outlook appears positive. The upside target is 385. Buy April futures. Initiate the position with a protective stop at 361. Trail the stop to control the downside risk. The margin on the futures position is approximately 17 per cent of the contract value. The minimum order size is 650 units. The open interest position as a percentage of the market-wide limit is about 10 per cent. No alternative strategies are available, as options on the stock are not actively traded.

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

(This article was published in the Business Line print edition dated April 13, 2005)
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