Markets

Consider short strangle on ONGC

KS Badri Narayanan Chennai | Updated on July 20, 2020

The long-term outlook remains negative for the stock of ONGC. The stock finds an immediate support at ₹72.90 and the crucial one at ₹65.75. A close below the latter will trigger a fresh decline in ONGC, which might take the stock towards ₹50. ONGC finds an immediate resistance at ₹92.80 and the next one at ₹103.45. A close above ₹118 will change the medium-term outlook to positive for ONGC, which can take the stock towards ₹147.90.

F&O pointers: ONGC July futures at ₹80.75 is marginally trading in the premium with respect to the spot close of ₹80.35. Despite strong gains by ONGC futures on Friday, open interest declined, signalling traders’ preference to book profit. Options trading indicates that the stock will move in a range, as both call and put options of most strike prices shed open positions.

Strategy: Traders could consider a short strangle on ONGC. This can be initiated by selling 90-call and 70-put. These options closed with premiums of ₹0.75 and ₹0.30 respectively. As the premium earned is the maximum profit in the strategy, this strategy will ensure an inflow of ₹8,085 (market lot 7,700 shares). A close below ₹68.95 or above ₹91.05 will start pinching the positions.

This strategy is for traders who can withstand wild swings and have deep pockets to meet margin commitments. Risk-averse traders can stay away from this strategy. Traders could exit from the positions if the loss mounts to ₹5,500.

(Note: The recommendations are based on technical analysis and F&O positions. There is a risk of loss in trading.)

Published on July 20, 2020

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

This article is closed for comments.
Please Email the Editor

You May Also Like