Reliance Power

Reliance Power faces a crucial resistance at Rs 148. If it pierces that level, the long-term outlook will turn to positive for the stock. In the short-term, Reliance Power faces resistance at Rs 135 and support at Rs 110. A conclusive close below the support will change the long-term outlook to negative.

F&O pointers: Though the stock added fresh long positions during Saturday's special trading session, option trading indicates a limited upside from current level, as higher strikes 130 and 140 calls witnessed higher accumulation of open interest.

Strategy: Traders can consider short strangle strategy for Reliance Power. This can be initiated by selling 140 call and 120 put. They have closed at Rs 7.80 and Rs 5.40 respectively on Saturday. Short strangle strategy is best suited when one expects the underlying stock to move in a narrow range. While maximum profit is the premium collected, the loss could be unlimited if it swings sharply in one direction, i.e., either up or down. Besides, writing option involves higher margin commitments. So this strategy is for traders who can stomach high risks.

Traders can consider holding the position till expiry. Maximum profit will occur if Reliance Power settles between the strike prices at the time of expiry. Since the market lot is 4,000 units/ contract, the maximum profit could be around Rs 52,800. Traders will face losses if the stock settles out of Rs 120-140 range.

Note: Traders should also bear it in mind that two major events — UP election results and Union Budget (on March 16) could trigger violent behaviour on the exchanges.

Cummins India

The stock is ruling at a critical level. After a sharp recovery, the stock now faces resistance. While resistance appears at Rs 490, Cummins India has near-term support at Rs 445. A conclusive close below Rs 385 will change the outlook to negative. In that event, the stock could weaken to Rs 335 level. If it above Rs 420 level, it has the potential to reach new high piercing its all-time high of Rs 578.

F&O pointers: Cummins India witnessed unwinding of long positions in Saturday's trade. The futures command high premium over the spot price, signalling positive bias. Options are not very active to discern any view.

Strategy: Consider going long on Cummins India with a stop-loss at Rs 445 for an initial target of Rs 490. Traders who wish to take higher risk can hold the position with a stop loss at Rs 420. Market lot is 500 units/ contract.

Note: The analysis and opinion expressed in this column are based on F&O data available at this point of time and on technical analysis based on past price movements. There is risk of loss in trading.

Feedback or queries (on positions) may be sent to > f&o@thehindu.co.in , >blfuturesoptions@gmail.com by Sunday noon. Replies will be published on Monday.

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