The stock of Kotak Mahindra Bank (₹1,757.10) is ruling at a crucial level. Another conclusive close above ₹1,753 will change the short-term outlook positive for the stock. It finds immediate resistance at ₹1,800 and the major one at ₹1,936. On the other hand, it finds an immediate support at ₹1,694 and the next one at ₹1,642. We expect the bank to move in a range with a positive bias.
F&O pointers: Kotak Mahindra Bank’s April futures closed at ₹1,761.70 against the spot price of ₹1,757.10, commanding a decent premium. This signals a fresh build-up of long positions as well as some shorts being covered. Option trading indicates that the stock could move between ₹1,700 and ₹1,800.
Strategy: We advise traders to buy plain vanilla call option on Kotak Mahindra Bank. Go long on 1760-call that closed with a premium of ₹24.65 last week. As the market lot is 400 shares, this would cost traders ₹9,860 which would be the maximum loss. This will happen if Kotak Mahindra Bank closes at or below ₹1,760 at the time of expiry.
On the other hand, profit potentials are high if the stock rises sharply in the next few days. The break-even point is ₹1,784.65. We advise traders to hold the position till the premium dips to ₹6.75 (stop-loss) or rises to ₹40 (book profits). If the stock opens on strong note traders may stay away from this strategy, as time value may hurt the position.
Follow-up: We had recommended a bull-call spread on Samvardhana Motherson. Hold the position for one more week and can be reviewed later as the stock remains flat.
Note: The recommendations are based on technical analysis and F&O positions. There is a risk of loss in trading