B. Venkatesh

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

Tata Motors: The June futures contract closed at 424.60. The outlook may turn positive if the June contract trades above 427.75. The upside target range is 440-445.

Buy June futures after it trades above 427.75. Initiate the position with protective stop at 420. 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 825 units. The open interest position is about 15 per cent of the market-wide limit.

Traders can alternatively construct bull call spread. This position can be initiated with long June 430 calls and short June 450 calls. The spread can be set up for a net debit of 5-6 points. The position will payoff 5-6 points net of acquisition cost (not including brokerage) if the target is achieved.

Hero Honda: The June futures contract closed at 552.80. The outlook may turn positive if the June contract trades above 555. The upside target range is 576-580.

Buy June futures after it trades above 555. Initiate the position with protective stop at 545. Trail the stop to control the downside risk. The margin on the futures position is approximately 17 per cent of the contract value. The open interest position is about 15 per cent of the market-wide limit. The minimum order size is 400 units. 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 June 1, 2005)
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