Derivatives

The strategy on ICICI Bank

KS Badri Narayanan | Updated on December 26, 2020 Published 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.

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

Published on December 26, 2020
This article is closed for comments.
Please Email the Editor