Strategy on ITC

KS Badri Narayanan | Updated on January 09, 2021

Traders willing to take risk can consider going long with a stop-loss at ₹198 for a target of ₹210

The long-term outlook on ITC (₹201.5) will remain negative as long as it stays below ₹259. However, the short-term trend has turned positive. The scrip finds an immediate support at ₹198 and a crucial one at ₹174. A close below the latter will change the bullish view on the stock. If the stock manages to hold on to ₹198 level, it has the potential to touch ₹235 and even to the key resistance level of ₹259. We expect it to move in a narrow range with an upward bias.

F&O pointers: The ITC January futures closed in premium at ₹202.60 against the spot price of ₹201.50. The futures added over 63.64 lakh shares on Friday and over 6.75 crore shares in the last 10 days despite the stock declining from ₹217 to ₹200 level. Option trading indicates that ITC may move in ₹190-220 range.

Strategy: Risk-averse traders can consider a bull-call spread on ITC. This can be initiated by selling ₹207.50-strike call option (January expiry) and simultaneously buying ₹202.50-strike call (January expiry). These options closed with a premium of ₹4.55 and ₹6.50, respectively. That means, investors have to initially fork out ₹1.95 for one lot of options contract or ₹6,240 (market lot: 3,200 shares). The maximum loss will be ₹6,240, which will happen if ITC closes at or below ₹202.50. A close above ₹207.50 will ensure a profit of ₹9,760.

We advise traders to hold the position till expiry or if the profit is achieved. Traders willing to take risk can consider going long on ITC futures with a (closing) stop-loss at ₹198 for a target of ₹210.

Follow-up: Strategy on TCS have hit the profit target.

Published on January 09, 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