Consider a bull call spread on ICICI Bank

KS Badri Narayanan | Updated on November 11, 2019 Published on November 11, 2019

The outlook for the stock of ICICI Bank (₹488.5) remains positive. As long as it stays above ₹380, the long term bullish trend will remain intact. The stock finds an immediate support at ₹462. If the current trend remains, ICICI Bank has the potential to reach ₹580.

F&O pointers: Despite the stock posting a strong gain, ICICI Bank futures shed open interest on Friday, signalling profit booking by some traders. Open interest did not see a secular accumulation, as it witnessed heightened activity last week due to Bank's result announcement. Option trading indicates a range of ₹440 and ₹500 for the stock.

Strategy: Traders could consider a bull call spread on ICICI Bank, which can be initiated by buying the ₹485-call and simultaneously selling the ₹500-call. They closed with a premium of ₹15.50 and ₹8.80 respectively. Traders have to incur an outflow if ₹9,212.50 to adopt this strategy. This would be the maximum loss one can suffer, if the stock closes at or below ₹485. A maximum profit of ₹11,412.50 (market lot: 1,375 shares per contract) is possible if ICICI Bank closes at or above ₹500. We advice traders to hold the options till expiry.

Alternatively, traders with a high-risk ability can consider going long on ICICI Bank futures with an initial stop-loss at ₹465. If the stock stays above ₹480 on the first half of Monday, then the stop-loss can be shifted to ₹480. Initial target is ₹516 while traders with deep pockets could wait till ₹538. However, remember to keep a strict trailing stop-loss

Follow up: Hold Titan positions.

Published on November 11, 2019
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