The stock of Bharti Airtel (₹797.45) rebounded from the support band of ₹760-770 last week. Note that a month ago, this stock broke out of the broad range of ₹640-770 within which it had been oscillating for a year since September 2021. So, the latest bounce shows good bull strength, and the charts indicate that the stock could witness a rally in the near term, possibly to ₹900. Resistance above that is at ₹1,000. On the downside, support below ₹760 is ₹735. However, we do not expect the price to fall below ₹760.
Strategy: One can consider buying a call option on Bharti Airtel. Since October series is nearing expiry and that time decay is not good for long options, we suggest opting November contracts. That is to buy an 820-strike call option whose premium closed at ₹10.8 on Friday. As the lot size is 950 shares, the outlay will be ₹10,260. The break-even price will be ₹830.8 (strike price plus the option premium). Place stop-loss at ₹4. Exit with profit if the option price rallies to ₹25.
Alternatively, one can buy November futures on the stock which closed at ₹790.95 on Friday. As a hedge, one can buy two lots of October expiry 780-strike put given its low cost of ₹0.65 per lot. Liquidate all the positions when the underlying hits ₹850. On the other hand, if it falls from here, exit on a daily close below ₹750.
If either of ₹850 or ₹750 is not reached on October expiry — October 27, close 780-strike October put options and immediately buy out-of-the-money put option as protection. But buy only one lot as the outflow will be higher. Moreover, one contract will be adequate for hedging.
Note: The recommendations are based on technical analysis and F&O positions. There is a risk of loss in trading