F&O Strategy: Buy put option on Asian Paints

K. S. Badri Narayanan | Updated on: Mar 12, 2022

The short-term outlook turned negative for the stock of Asian Paints (₹2,932). The stock finds an immediate resistance at ₹3,069 and the next one at ₹3,174. Only a close above ₹3,330 will turn the short-term outlook positive. On the other hand, Asian Paints finds an immediate support at ₹2,708 and a major one at ₹2,410. We expect the stock to remain volatile in the short-term with negative bias.

F&O pointers: Despite a sharp gain on Friday, Asian Paints March futures contract shed open positions, indicating that traders preferred to book profits rather than carrying over the position. Option trading indicates resistance at ₹3,300 and support at ₹2,700.

Strategy: Traders could consider buying a ₹2,940 put option on the stock of Asian Paints. This option closed with a premium of ₹103.40 on Friday. As the market lot is 150 shares per lot, this strategy will cost traders ₹15,510, which would be the maximum loss one can suffer. This will happen if Asian Paints holds at or above ₹2,940 on expiry.

On the other hand, profit potential is high if the stock falls sharply in the current series too. A close at ₹2,836.60 will make the position break-even. However, as we expect the downtrend in Asian Paints to continue, the possibility of position turning positive is very high. Traders can exit the position with a profit of ₹12,000; or exit if loss mounts to ₹5,000.

Follow-up: Strategy of writing Maruti (April) call that we recommended last week is in profit now. Traders can consider booking profits.

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

Published on March 12, 2022
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