F&O Strategy: Go for bull-call spread on HDFC AMC

K. S. Badri Narayanan | Updated on: Mar 19, 2022

We expect the stock to consolidate around current levels with a positive bias

The stock of HDFC Asset Management Company (₹2,238) is technically at a crucial level. A conclusive close above ₹2,242 will change the short-term outlook too positive. A breach above this resistance will take the stock towards ₹2,497 and even to ₹2,681. On the other hand, HDFC AMC finds an immediate support at ₹2,206 and ₹2,145. We expect the stock to consolidate around current levels with a positive bias.

F&O pointers: Despite the underlying stock gaining over the past couple of weeks, HDFC AMC March futures shed open positions. From a high of 26.65 lakh shares on March 2, the open interest positions declined to 23.57 lakh shares. Option trading indicates that the stock could move in the ₹2100-2,300 range.

Strategy: We advise traders to consider a bull-call spread on HDFC AMC. This can be done by selling the 2280-call and simultaneously buying the 2240-call. These options closed with a premium of ₹27 and ₹40.30 respectively. That means, the strategy will cost traders ₹2,660 (market lot 200 shares) which will be the maximum loss. This will occur if the stock closes below ₹2,240 on expiry.

On the other hand, a profit of ₹5,340 is possible if the stock surges above ₹2,280. We advise traders to hold the position till expiry or liquidate the position with maximum profits whichever happens first.

Alternatively, traders with higher penchant for risk can consider going long on HDFC AMC futures with an initial stop-loss at ₹2,205. If the stock opens considerably higher, the stop-loss can be shifted to ₹2,238. Initial target can be ₹2,278 and the next one at ₹2,323. As this may cause higher losses than in bull call spread if we get the direction wrong, risk-averse traders can stay away from trading in futures.

Follow-up: As Asian Paints surged sharply, the position would have triggered losses.

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

Published on March 19, 2022
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