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The stock of NTPC (₹165.55) is ruling at a crucial level. It finds an immediate support at ₹158.60 and the major one at ₹133. On the other hand, it finds a resistance at ₹177 and a close above ₹198 will change the long-term outlook positive. The stock has been hovering between ₹160 and ₹175 in the last few days. We expect the stock to move in a narrow range with a positive bias.
F&O pointers: Despite the stock moving in a narrow range, open interest in NTPC February futures surged to 6.43 crore shares from 14.64 lakh shares. Besides, NTPC February futures at ₹166.45 against the spot price of ₹165.55, indicates carry over of long positions by traders. Option trading indicates that the stock could move in the ₹155-175 range.
Strategy: We advise traders to consider a bull-call spread on NTPC, which can be initiated by selling ₹168.25-strike call and simultaneously buying the ₹165.75-strike call. As these options closed with a premium of ₹2.90 and ₹3.95 respectively, the strategy would cost ₹5,985 (or ₹1.05/lot). This would be the maximum loss one can suffer which will happen if NTPC slips below ₹165.75.
On the other hand, a profit of ₹14,250 is possible if NTPC rises above ₹168.25 before expiry. We advise traders to enter positions in the ₹0.75-1.50 range (combined premium) and exit when combined premium rises to ₹2.5.
Note: The recommendations are based on technical analysis and F&O positions. There is a risk of loss in trading
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