The stock of TVS Motor Company (₹1,305.55) is cruising well on the bull path. The outlook remains positive and if the current trend sustains, the stock could reach ₹1,385. TVS Motor finds immediate support at ₹1,234. Subsequent support is at ₹1,000 and only a close below this level will change the short-term outlook to negative. The long-term positive outlook will be negated only on a close below ₹870.
F&O pointers: TVS Motor June futures closed at ₹1,296.80, at discount to the spot price of ₹1305.55. This is mainly because of closing of long positions by traders to book profits, as the rally was quick. Option trading indicates a movement between ₹1,200 and ₹1,400.
Recommendation: We advise traders to consider a bull call spread on TVS Motor that can be initiated by selling 1320-strike call and simultaneously buying 1300-strike call. These options closed with a premium of ₹21.65 and ₹29.75 respectively. Thus, the net outgo (market lot 700 shares) is ₹8.10 or ₹5,670, which will be the maximum loss one can suffer.
The maximum loss will happen if the stock of TVS Motor is below ₹1,300 on expiry. A maximum profit of ₹8,330 is possible if the price rises above ₹1,320. Traders can exit the position either at a maximum loss or at a maximum profit.
Follow up: L&T Finance moved on expected lines.
Note: The recommendations are based on technical analysis and F&O positions. There is a risk of loss in trading