The stock of Ashok Leyland (₹137.9) has been on a decline since early September after it faced a resistance at ₹168. While the support at ₹142 has been arresting the fall below it since November, the sell-off that occurred last week dragged the stock below this level.

This has opened the room for more downside. Since it has broken the support only last week, the downswing can be sharp in the near term, particularly in the next one or two weeks.

From the current level of ₹137.9, the nearest support can be spotted at ₹130. Subsequent support is at ₹120. We expect the stock to touch ₹130 within a couple of weeks.

Thus, traders can attempt to monetise this potential fall by buying a put option. Since the December series has only a few trading sessions left, we advise traders to buy the January expiry put option.

Strategy: Go long on January expiry 135-strike put option. Its premium stood at ₹3.7 by the end of last week. One can buy one lot at ₹3.7 and buy one more lot if the premium dips to ₹3. Therefore, the average premium would be ₹3.35, and this will result in an initial outflow of ₹33,500 (lot size of Ashok Leyland derivatives is 5,000 shares).

If traders want to risk less, buy only one lot — at ₹3.7.

Exit the option if the premium rises to ₹7.9.

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