The short-term outlook turned positive for the stock of AU Small Finance Bank (AU SFB) (₹634.75) after a conclusive close above ₹625. One more firm close above that price will reconfirm the bullish trend.

If the stock sustains at the level, it can reach ₹690. A close above ₹725 will even change the long-term outlook positive for the stock. AU SFB finds an immediate support at ₹588 and a close below ₹570 will negate the current positive trend.

F&O pointer: AU SFB April futures closed at ₹633.15 against the spot price of ₹634.75. Besides, the contracts shed open interests too in the last two days when the stock price moved up. Option trading indicates that the stock could move in the ₹550-700 range.

Strategy: Consider a calendar bull-call spread on AU Small Finance Bank. This can be initiated by selling the current-month 650-strike call and simultaneously buying the same strike of May series. As these options closed with a premium of ₹13.50 and ₹26.35 and the market lot is 1,000 shares, this strategy would cost ₹12.85/contract or ₹12,850.

The premium paid (₹12,850) would be the maximum loss, which will happen if the stock fails to cross ₹662.85. Profit potentials are high if the stock holds onto current levels in the next couple of weeks and rises sharply then. We suggest holding the position for at least three weeks.

Follow-up: Consider exiting HDFC Bank bull-call spread.

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

Related Topics
comment COMMENT NOW