Derivatives

F&O Strategy: Consider calendar bull-call spread on Infosys 

K. S. Badri Narayanan | Updated on: Jun 18, 2022

Option trading indicates that the stock could move in a ₹1,300-1,600 range

Though the short-term outlook for the stock of Infosys (₹1,387.3) remains negative, the long-term bull trend remains intact. This will remain so as long as the stock rules above ₹1,139. The immediate support appears at ₹1,236 for Infosys. The stock finds an immediate resistance at ₹1,540 and a close above ₹1,636 will change even the short-term outlook positive for Infosys. We expect the stock to recover after hitting the support levels.

F&O pointers: Infosys futures closed at ₹1,390.7 against the spot close of ₹1,387.3 on Friday. The counter saw shedding of open positions with falling share price, signalling unwinding of long positions. Option trading indicates that the stock could move in a ₹1,300-1,600 range.

Event: Infosys will declare its first quarter of FY23 in July mid-week.

Strategy: Traders could consider a calendar bull-call spread on Infosys. This can be initiated by selling the current month 1400-strike call and simultaneously buying the same strike of July month. These options closed with a premium of ₹26.60 and ₹56. As the market lot is 300 shares, this strategy will cost ₹8,820, which will be the maximum loss one can suffer if the stock fails to hold to ₹1,400 level.

On the other hand, profit potential is huge if the stock falls in the current series and rises sharply in the next month. The break-even point is ₹1,430. We advise traders to hold the July position till the third week while June series call can be closed if the price dips to around ₹1.

Follow-up: Stop loss would have triggered on Sun Pharma futures.

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

Published on June 18, 2022
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