Stock Strategy: Consider shorting Jet Airways

Updated on: Jun 11, 2011
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Jet Airways: The outlook remains negative for Jet Airways. It now finds an immediate support at Rs 415-418 and a more crucial one at Rs 392. A close below Rs 392 could weaken the stock towards Rs 335. Only a close above Rs 675 would change the outlook for the stock. It however finds a major resistance at Rs 524 and the immediate one at Rs 487.

F&O pointers: The counter witnessed unwinding of long positions along with a fall in share price. Options on Jet Airways did not elicit any trading interest.

Strategy: Traders can consider shorting Jet Airways with a stop-loss at Rs 487 for an initial target of Rs 415. If the stock opens on a weak note, shift the stop-loss to Rs 450 or the day's high (on Monday), whichever is higher. Market lot for Jet Airways is 500 shares.

ITC: The overall outlook remains positive for ITC, despite the stock ruling near its all-time high level. However, in the medium term, the stock could face some resistance. ITC now finds strong resistance at Rs 198 while support appears at Rs 182. A close below Rs 182 could filter down the stock towards Rs 169.

On the other hand, if the stock sustains its current trend, then ITC has the potential to reach Rs 216.

F&O pointers: ITC June futures saw marginal accumulation of long position on Friday. Option trading also indicates a neutral view as both calls and puts witnessed accumulation of open position, albeit marginally.

Strategy: Traders can consider going short on ITC, with a stop loss at Rs 195 for an initial target of Rs 182.

Traders can also consider short straddle using 190-strike. While ITC 190 call closed at Rs 4.80, the same strike put closed at Rs 3. While the maximum profit in the strategy is the premium collected, the loss could be unlimited if the stock moves violently in any one of the directions i.e. either up or down.

So this strategy is for traders, who are willing to take high risk. Besides, traders have to bear margin commitments, as writing (selling) options require higher outgo of money.

Risk-averse traders can consider buying 190 put, which ended at Rs 3. While the maximum loss is the premium paid, the profits could be unlimited if ITC moves on expected lines i.e. down. Market lot for ITC is 2,000 shares.

Feedback or queries (on positions) may be sent to >f&o@thehindu.co.in, >blfuturesoptions@gmail.com by Sunday noon. Replies will be published on Monday.

Published on June 11, 2011

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