Market Strategy

Stock Strategy: Short Pantaloon with trailing stop

K.S. Badri Narayanan | Updated on October 27, 2012 Published on October 27, 2012



Pantaloon Retail (Rs 180.2): Pantaloon Retail failed to sustain the recent gains and turned negative. The long-term outlook remains negative as long as it stays below Rs 306. The short-term outlook also turned negative for the stock. It now finds immediate resistance at Rs 207 and the next one at Rs 246. Immediate support for Pantaloon Retail appears to be at Rs 160 and next one at Rs 136. One more conclusive close below Rs 180, likely to drag the stock towards the support zone.

F&O pointers: The Pantaloon Retail futures saw unwinding of open positions along with fall in share price. This indicates that traders have less confidence in the stock. Options are not that active. Cues available indicate negative bias.

Strategy: Traders could consider selling Pantaloon Retail futures with a stop-loss at Rs 189. The stop-loss can be shifted to Rs 177 if the stock closes below that level.

Alternatively, traders could also consider writing 190 call, which closed at Rs 6.45. While the maximum profit could be the premium collected, the loss potentials are unlimited should the stock surges sharply. Traders can reap a maximum profit on a close below or at Rs 190. Since the market lot is 2,000 units/ contract, both the strategies are for traders who can stomach the risk. This strategy can be adopted for at least two weeks.

Follow-up: Last week, we advised traders to consider a calendar put spread or a plain vanilla put using 1,600-strike. The November put saw significant value erosion. The calendar spread is also in negative. As advised traders could consider holding it till expiry.

Note: Feedback or queries (on positions) may be sent to > f& , > by Sunday noon. Replies will be published on Monday.

Published on October 27, 2012
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