Derivatives

Buy a put option on Hero MotoCorp

KS Badri Narayanan | Updated on October 16, 2021

October futures sheds open interests last week

The stock of Hero MotoCorp (₹2,926) is likely to move in a narrow range with a downward bias in the short-term. The stock finds an immediate support at ₹2,878 and the next one at ₹2,764. A close below ₹2,723 will change the outlook negative. On the other hand, Hero MotoCorp finds a resistance at ₹3,046 and a close above ₹3,295 will change the outlook positive.

F&O pointers: Hero MotoCorp October futures have been shedding open interest positions in the last few days even as the underlying share price moved up. From 43.02 lakh contracts, open positions slipped to 36.79 lakh contracts in the last six days. During the period, the stock moved up from ₹2,794 to ₹2,930 level. This signals that traders preferred to book profits on every rise. Option trading indicates that the stock could move in a range of ₹2,800-3,100.

Strategy: Traders could consider buying a ₹2,900-put which closed at a premium of ₹53.35 on Thursday. As the market lot is 300 shares per contract, this will cost traders ₹16,005, which will be the maximum loss one could suffer.

The maximum loss will happen, if Hero MotoCorp sustains above ₹2,900 during the current series. On the other hand, profit potentials are huge if Hero MotoCorp falls swiftly. A close below ₹2,846.65 will make sure the position is profitable on expiry. Traders could consider exiting the position if the loss mounts to ₹9,850.

Follow-up: Hold Motherson Sumi Systems call options (sold) though the stock moved up last week. Traders could book profits on BHEL option strategy (recommended a couple of weeks back) and exit from Infosys at a loss.

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

Published on October 16, 2021

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