How a call-spread on Apollo Hospitals stock can make money

KS Badri Narayanan | Updated on June 26, 2021

This can be initiated by selling 3,600-strike call and simultaneously buying the 3,500-strike call

The outlook for Apollo Hospitals Enterprises (₹3,439) appears healthy. The stock finds immediate support at ₹3,066 and the next one at ₹2,848. A close below the latter will arrest the short-term positive outlook. However, the long-term positive outlook remains intact as long Apollo Hospitals rules above ₹2,285. If the current bullish trend sustains, the stock of Apollo Hospitals can reach ₹3,615. We expect the bullish trend to continue.

F&O pointers: Apollo Hospitals saw a strong rollover of 98 per cent in open interest positions from June to July series. The counter also saw a robust build-up of long positions along with a sharp rise in share price on Friday. Options are not that active. However, a little cue available from the option chain suggests that the stock faces support at ₹3,000 and resistance at ₹3,600.

Strategy: Traders could consider a bull-call spread on Apollo Hospitals which can be initiated by selling 3,600-strike call and simultaneously buying the 3,500-strike call. These options closed with a premium of ₹75.65 and ₹113.55.

This strategy will cost investors ₹37.9 per contract (i.e., ₹9,475, market lot: 250 shares), which will be the maximum loss one can suffer. For that to happen, Apollo Hospitals stock has to rule below ₹3,500. On the other hand, a profit of ₹15,525 is possible if the stock closes at or above ₹3,600. Hold the position till expiry or exit at maximum profit.

Follow-up: Hold Coal India 150-call; as advised last week, exit if loss mounts to ₹9,500.

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

Published on June 26, 2021

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

This article is closed for comments.
Please Email the Editor