Consider short-strangle on Adani Enterprises

Adani Enterprises can move in a narrow range. Hence, a short-strange strategy is recommended.

Adani Enterprises (₹215): Adani Enterprises finds immediate support at ₹205 and resistance at ₹235. A conclusive close above ₹235 has the potential to take the stock towards ₹275. However, a close below ₹205 can take it to ₹180.

F&O pointers: Adani Enterprises’ February futures witnessed unwinding of long positions on Friday along with a decline in share price. However, it provides little cue, as just 12,000 shares got squared off on Friday. Options are not very active.

Trading in options indicates a negative bias, as ₹220-strike put, shed open position, indicating that it could act as a strong resistance for the stock.

Strategy: With just two weeks to settlement, short-strangle strategy can help traders make the most from the narrow movement. They can consider selling the ₹230-strike call and ₹210-strike put options. This will result in an inflow of ₹11,900, as the options closed at ₹2.15 and ₹3.80, respectively.

As the maximum profit is the premium collected, we advise traders with high-risk appetite to consider this strategy. Besides, the loss could be unlimited if Adani Enterprises pursues a unidirectional move — either up or down.

A close below ₹204 or above ₹236 will affect traders’ position in this strategy.

In other words, a loss of about 5 per cent or gain of 10 per cent from current levels before the expiry, will pinch traders.

Square off the position if Adani Enterprises reaches ₹210 or ₹225. Stop-loss can be placed where the combined premium touches ₹8. It may be noted that writing (selling) options involves higher margin commitments. Maximum profit will occur if the stock closes between the strike prices.

Follow-up: Last week, we had advised short-strangle on Arvind. The stock has been moving on expected lines. Traders could consider holding it till expiry.

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