The stock of Indian Energy Exchange (IEX) (₹151.55) has been moving in a ₹120-170 band for quite some time. We expect the stock to move in the range with a positive bias. It will try to break the upper end of the band of ₹170 and if successful, then IEX can touch ₹210. On the other hand, if IEX dips below ₹120, it can hit ₹95. However, we feel the chance for the latter is very remote.
F&O pointers: Despite IEX March futures hovering around ₹144 in the last 10 days, it saw steady accumulation of Open Interest (OI) from 70.85 lakh shares to 5.6 crore shares. However, when the stock surged 5 per cent on the special session on Saturday, IEX’s OI dropped by 14.4 lakh shares, signalling profit taking.
Option trading indicates that IEX could move in a ₹145-160 range.
Strategy: Consider a bull-call spread in IEX. This can be initiated by selling 160-call and simultaneously buying 150-strike call. As these options closed with a premium of ₹5.35 and ₹9.50 respectively, the net cost will be ₹4.15/contract or ₹15,562.50 (marker lot 3,750). The maximum loss will happen if IEX stock at or below ₹150 till expiry.
On the other hand, a profit of ₹5.85/contract or ₹21,937.50 is possible, if IEX manages to move above ₹160 during the series.
We advise traders to hold the position with initial stop-loss at ₹2 (combined value) that can be revised to ₹6 if the premium moves past ₹7. We advise traders to hold the position for at least two weeks.
(Note: The recommendations are based on technical analysis and F&O positions. There is a risk of loss in trading)