Why bull-call spread on GAIL India may be a good strategy

KS Badri Narayanan | Updated on September 11, 2021

Open interest in this counter has more than doubled in the last 15 days

The stock of GAIL India (₹145.15) rules at a crucial level. We expect the short-term outlook to turn positive for the stock. A close above ₹153 will trigger a fresh rally towards ₹165 and even to ₹180. On other hand GAIL India faces support at ₹140 and ₹129.

F&O pointers: GAIL’s September futures has been accumulating steady open interest positions in the last 15 days despite the stock moving in a narrow range around ₹145. Open positions jumped from 1.94 lakh shares on August 24 to 4.24 lakh shares on September 9.

Strategy: Traders could consider a bull-call spread. This can be constructed by buying ₹145-call and simultaneously selling the ₹150-call, which closed with a premium of ₹5.60 and ₹3.65 respectively. As the market lot is 6,100 shares, this will cost investors ₹11,895 which will be the maximum loss. On other hand a profit of ₹18,605 is possible if GAIL India moves past ₹150. Traders could exit if the loss mounts to ₹9,500.

Alternatively, traders who wish to take a risk can buy GAIL India futures with a stop loss at ₹138 initially, which can be shifted to ₹145 if it opens on strong note on Monday. If the stock opens negatively, traders could stay away from this strategy. As the loss can happen in a short span of time, this strategy is for traders who can withstand wild swings and meet margin commitments.

Follow-up: Stop loss would have triggered for IEX as it jumped sharply contrary to our expectations.

Note: The recommendations are based on technical analysis and F&O positions. There is a risk of loss in trading.

Published on September 11, 2021

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

  1. Comments will be moderated by The Hindu Business Line editorial team.
  2. Comments that are abusive, personal, incendiary or irrelevant cannot be published.
  3. Please write complete sentences. Do not type comments in all capital letters, or in all lower case letters, or using abbreviated text. (example: u cannot substitute for you, d is not 'the', n is not 'and').
  4. We may remove hyperlinks within comments.
  5. Please use a genuine email ID and provide your name, to avoid rejection.

You May Also Like