Derivatives

What options trading indicates on Infosys stock movement?

KS Badri Narayanan | Updated on December 12, 2020

Option trading indicates that the stock could move in a range of ₹1,100-1,200

The outlook on Infosys (₹1,163.20) remains positive. The stock finds an immediate support at ₹1,112 and the crucial one at ₹1,068. A close below the latter will alter the positive outlook for the short term. However, if Infosys maintains the current momentum, it can touch ₹1,350.

F&O outlook: The futures rules in a premium of just about a rupee. Over the week, Infosys futures shed open positions from 3.82 crore shares to 3.67 crore shares. Option trading indicates that Infosys could move in a range of ₹1,100 - ₹1,200.

Strategy: We advise traders to consider a bull-call spread strategy. This can be initiated by selling 1,200-strike call option (December expiry) and simultaneously buying 1,160-strike call option (December expiry). These options closed with a premium of ₹19.25 and ₹35.10, respectively. That means the net spend for traders will be ₹15.85 per lot, i.e., ₹9,510 (market lot: 600 shares). This will be the maximum loss one can suffer in this strategy, if Infosys closes at or below ₹1,160 at the time of expiry. On the other hand, a profit of ₹14,490 is possible should Infosys close at or above ₹1,200 at the time of expiry. This will be the maximum profit.

We advise traders to hold the position till expiry.

Follow-up: Hold Sun TV short strangle positions, even as the stock climbed last week.

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Published on December 12, 2020
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