Derivatives

Set up bear-put spread on Titan stock this week

KS Badri Narayanan | Updated on April 03, 2021

Maximum loss will be the premium paid

The long-term outlook for the stock of Titan Company remains positive, as long as it stays above ₹1,318. Titan sees an immediate support at ₹1,504 and the next one at ₹1,424. The major support appears at ₹1,393. If the current bullish trend persists and the stock conclusively closes above ₹1,578, it has the potential to touch ₹1,624.

However, we expect the stock to moderate a bit before pursuing upward journey.

F&O pointers: Titan Company April futures has seen steady accumulation of open interests along with price rise.

Besides, the April contract at ₹1,570.10 maintains a healthy premium of ₹10 over the spot price of ₹1,559.35, signalling existence of long positions. Option trading in the stock indicates a range of ₹1,400 to ₹1,600.

Strategy: We advise traders to consider a put-spread strategy on Titan Company, as we expect a correction for the stock. This can be constructed by buying ₹1,560-strike put and simultaneously selling ₹1,540-strike put. These options closed with a premium of ₹39.65 and ₹31.05 respectively.

As the market lot is 750 shares a contract, this strategy will result in a net outflow of ₹8.60/contract or ₹6,450. The maximum loss one can suffer from this strategy is the net premium paid (₹6,450) and that will happen if Titan Company stays above ₹1,560.

On the other hand, a profit of ₹8,550 is possible if the stock closes at or below ₹1,540.

We advise traders to exit the position if the loss mounts to ₹4,500. Traders with higher risk-taking ability can hold on to the position till expiry.

 

Follow-up: Last week, we advised selling HCL Tech ₹1,060-call.

Though the stock remained resilient, we advise traders to hold on to the position.

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Published on April 03, 2021
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