Derivatives

A high-risk, high-return strategy to profit from Havells India stock

KS Badri Narayanan | Updated on August 21, 2021

This is strictly for traders who can understand risks and can meet margin commitments

The outlook for the stock of Havells India (₹1,236.30) remains positive. The stock finds an immediate support at ₹1,223 and a major one ₹1,201. A close below the latter could trigger a minor fall in the stock. As long as, Havells India remains above ₹1,047, the bullish trend will remain intact. However, we expect the stock to move in a narrow range before taking a clear direction.

F&O pointers: Havells India has witnessed a healthy rollover of 16 per cent to next series, so far. Most of the rollover is on the long side. Havells September futures closed in premium at ₹1,239.45 against the spot price of ₹1,236.30 while the Havells August futures ended in discount at ₹1,234.10. Option trading in August series indicates that the stock is likely to move in ₹1,160-1,260 range.

Strategy: Traders could consider a short strangle on Havells India. As this strategy is very risky, it is only for traders who fully understand risks involved.

The strategy can be initiated by selling the ₹1320-call and ₹1160-strike put, which have closed at ₹3.65 and ₹3.60. That means, this strategy will make an inflow of ₹7.25/contract or ₹3,625 (lot size: 500 shares), which will be the maximum profit. However, loss can be high if the stock swings wildly in one direction. A close below ₹1,152.75 or above ₹1327.25 will start hurting the position.

Follow-up: SBI declined sharply last week. However, hold the positions as mentioned with stop loss.

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

Published on August 21, 2021

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