Technical Analysis

Bear-call spread on Infosys

KS BADRI NARAYANAN | Updated on August 31, 2014 Published on August 31, 2014



The long-term outlook for Infosys (₹3,594) remains positive. However, in the short term, the stock is likely to be under pressure. It finds immediate support at ₹3,575, a close below which can take it lower to ₹3,323.

On the upside, a conclusive close above ₹3,672 — its immediate resistance — will reinforce the stock’s long-term bullish momentum. In such a scenario, the stock can move above ₹4,000.

F&O pointers: Infosys futures witnessed a healthy rollover of 73 per cent to September. Option trading indicates that Infosys could see a support at ₹3,500 and a resistance at ₹3,700.

Strategy: Traders can consider a bear-call strategy on Infosys. This can be initiated by selling ₹3,300 call, which ended at ₹315, and simultaneously buying ₹3,600 call that closed at ₹84.05. This strategy will entail an initial inflow of ₹231/contract, which is the maximum profit that can be achieved in this strategy. For that to happen, Infosys has to close at or below ₹3,300 at the time of expiry. Maximum loss in this strategy is ₹69/contract (or ₹8,631 — lot size of 125 shares). This will occur if Infosys closes at or above ₹3,600. We advise risk-averse traders to exit if the loss mounts to ₹7,000.

Published on August 31, 2014
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