F&O strategy: Sell April ₹8000-call as Maruti on a downhill

K. S. Badri Narayanan | Updated on: Mar 05, 2022

As volatility is expected, risk averse traders can stay away

After a steep fall in the last few days, the stock of Maruti Suzuki (₹7,247.30) is ruling at a crucial level. The stock finds an immediate support at ₹7,002 and the next one at ₹6,872. Maruti Suzuki finds a major support at ₹6,590 and a close below that will change the medium-term outlook too negative. The stock finds a hurdle at ₹7,809 and a major resistance at ₹8,367.

F&O pointers: The Maruti Suzuki March futures added open positions in the last few days even as the stock price tumbled sharply. This signals that the addition of short positions triggered the downtrend on the stock. However, the contract closed at ₹7,261.45, a premium of about ₹14 with respect to the spot close of ₹7,247.30. Option trading indicates a wide range of ₹6,500-8,500 for the stock.

Strategy: Traders with risk high appetite can consider the following strategy, as this involves high margin commitments and can quickly cause heavy damage financially. We advise traders to sell Maruti Suzuki April ₹8000-strike call option, that closed at ₹213.45. As the market lot is 100 shares per lot, this strategy will ensure an inflow of ₹21,345 which will be the maximum profit. For that to happen Maruti Suzuki will have to close at or below by April expiry.

A close above ₹8213.45 (break-even point) will start hurting the position. We advise traders to hold the position for at least two weeks and review the position later. However, if the stock slides further and if call option price drops to ₹50, traders could consider booking profits.

Follow-up: We had advised a long futures on Reliance Industries. As the stock is relatively stable, we advise traders to hold the position with mentioned stop losses.

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

Published on March 05, 2022
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