The strategy on ICICI Bank

KS Badri Narayanan | Updated on December 26, 2020

Option trading indicates accumulation of open interest at ₹550-call and ₹500-put in Jan series

The long-term outlook remains positive for the stock of ICICI Bank (₹513.5). If the current trend sustains and closes above ₹521, it has the potential to reach ₹550. The scrip finds an immediate support at ₹499 and a close below that level will drag the stock towards ₹469. As long as ICICI Bank stays above ₹438, the long-term positive outlook remains intact. However, we expect the stock to move in a narrow range with a downward bias in the short term.

F&O Pointers: ICICI Bank witnessed a rollover of 14 per cent in January series at the end of the penultimate week of December series expiry, which is quite usual. The ICICI Bank January futures closed at ₹515.60 against the spot price of ₹513.55 and the December futures of ₹513.65, signalling the rollover of long positions.

Option trading indicates accumulation of open interest at ₹550-call (₹550 CE) and ₹500-put (₹500 PE) in January series, signalling the possible trading range for the stock.

Strategy: We advise traders to consider bear-put-calendar-spread options strategy on ICICI Bank. This can be constructed by selling ₹490-put (₹490 PE) of the current month and simultaneously buying the same strike put option of next expiry. These options closed with a premium of ₹1.45 and ₹11.40, respectively. That means one has to shell out ₹9.95 per contract, i.e., ₹13,681.25 (market lot: 1,375 shares).

The maximum loss would be the premium paid, while profit potentials are huge if ICICI Bank stays above ₹490 in the next four days and starts slipping from January 1. A close at or below ₹480.05 (in January) will turn the trade positive.

We advise traders to hold this position till the expiry of next series.

Follow-up: The long put strategy on Bharti Airtel reached target on Monday itself.

Published on December 26, 2020

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