The shares of Ashok Leyland remain at a crucial level. The stock finds a key resistance a ₹83.50 and the major one at ₹121. A close above the latter will confirm the long-term bullish view on the stock. On the other hand, it finds immediate support at ₹72.30 and a crucial one at ₹62.50. A close below the latter will change the outlook negative for the stock.
F&O pointers: The Ashok Leyland futures closed in discount at ₹77.10 as against the underlying price of ₹77.50. Despite a substantial gain of about 4 per cent on Friday, Ashok Leyland futures shed 37.86 lakh in open positions, indicating profit-booking by some traders. Option trading suggests a range of ₹70 and ₹80 for Ashok Leyland.
Strategy: We advise traders can consider a short strangle strategy on Ashok Leyland. This can be constructed by simultaneously selling the ₹85-strike call, and the ₹65-strike put options, which closed with a premium of ₹0.90 and ₹0.40 respectively.
This would entail an inflow of ₹7,800 to traders, which would be the maximum profit one can earn from this strategy. For a maximum profit, Ashok Leyland stock has to close between the strike price i.e. between ₹85 and ₹65 at the time of expiry.
On the other hand, loss potentials are very high, if Ashok Leyland makes a sharp move either up or down. Any close below ₹63.70 or above ₹ 86.3 will start pinching the traders.
We advice traders to hold on to the position for at least till close to the expiry. Risk-averse traders could stay away from the position, as wild swings could result in a considerable loss. Besides, it may result in taking delivery of 6,000 Ashok Leyland shares.
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.