Reliance Industries (Rs 834.4): The stock of Reliance Industries has been moving in the Rs 700-1,000 range for quite sometime. In the recent Nifty rally, Reliance was among the laggards. If the liquidity vigour continues, then Reliance will also join the party. On the other hand, if there is any flight of capital from equity, the stock will head towards its support level.
F&O pointers: Reliance Industries witnessed unwinding of close to 3.5 lakh shares in open interest positions on Friday in May series. This indicates that traders are not willing to carry over their positions. Option trading also indicates negative bias, as puts shed open interest positions, suggesting the emergence of put writers.
Strategy: Traders can consider a long strangle on Reliance Industries. This can be initiated by buying Rs 860 June call and Rs 780 June put. The options closed at Rs 21.25 and Rs 7.5 respectively.
Long strangle is best suited when one expects the underlying equity to be volatile.
While the maximum loss is the premium paid (about Rs 7,200) the gains could be unlimited if Reliance Industries either swings above Rs 860 or below Rs 780 in the near-term.
Maximum loss occurs if Reliance settles between the strikes at the time of expiry. Immediate swing in one of the directions will generate profit due to time value. Traders can hold this position with a combined options stop-loss at Rs 18.
( Note: Feedback or queries (on positions) may be sent to > blfuturesoptions@gmail.com by Sunday noon. Replies will be published on Monday.)
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