Derivatives

Futures & Options

Strategy on ITC

KS Badri Narayanan | Updated on January 09, 2021 Published 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.

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Published on January 09, 2021
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