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Despite recent recovery, we expect Bharti Airtel to move in a narrow range. The stock finds major resistance at Rs 415 and only a close above will change the long-term outlook positive for Bharti Airtel. The stock is likely to move in a narrow range between Rs 320 and Rs 365. A close above Rs 365 can take the stock towards Rs 390 range.
F&O pointers: The strong gain on Friday was supported by long accumulations. However, rollover of open interest is just 13 per cent. Option trading indicates a neutral view as both call and puts accumulated open interest position in April series.
Strategy: Traders can consider short strangle strategy in Bharti Airtel. This can be initiated by selling 320 put and 360 call in April series. They have closed at Rs 6.55 and Rs 7.25 respectively on Friday.
Short strangle strategy is best suited when one expects the underlying stock to move in a narrow range. Maximum profit in this strategy is the premium collected, while the loss could be unlimited if Bharti Airtel pursues unidirectional movement, 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 Bharti Airtel settles between Rs 320 and Rs 360 at the time of expiry.
Since the market lot is 1,000 units/contract, the maximum profit could be around Rs 14,000, based on Friday's close. Traders will face losses if the stock deviates from Rs 320-360 range.
JP Associates
The long-term outlook remains negative for JP Associates as long as it stays below Rs 125. The stock finds crucial resistance at Rs 85. In the immediate term, JP Associates is likely to move in a broader range of Rs 55 and Rs 85. It finds immediate support at Rs 74 and the next support is at Rs 69.
F&O pointers: The JP Associates futures witnessed a rollover of 19 per cent to April series. Option trading indicates a strong resistance for JP Associates at Rs 85.
Strategy: Consider short strangle on JP Associates using 70 put and 85 call that have closed at Rs 1.75 and Rs 3.55 respectively. The market lot is 4,000 units/contract.
As the maximum profit is the premium collected, we advise traders with high risk quotient to consider this strategy. Besides, the loss could be unlimited if JP Associates swings wildly in one direction (up or down). Also, writing option involves higher margin commitments.
Note: 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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