Technical Analysis

Consider calendar strategy in Axis Bank

KS Badri Narayanan | Updated on March 23, 2014 Published on March 23, 2014


24Axis Bank.eps

Axis Bank (₹1,389.70): The medium- and long-term outlook for Axis Bank has turned positive. It now finds immediate resistance at ₹1,494. A close above this level will trigger a fresh rally in the stock. This can take the stock above its previous all-time high of ₹1,608 that it registered in October 2010.

However, in the short-term, the stock could face pressure. Axis Bank finds immediate support at ₹1,302 and ₹1,260. Only a close below ₹1,120 will change the long-term outlook negative.

F&O pointers: Axis Bank futures witnessed a decent rollover of about 20 per cent to April month series. Current month options indicate that Axis Bank may trade in the ₹1,300-1,400 range. Activity in April month series is very low.

Strategy: With just four days left for settlement, traders can set up a strategy by buying current month ₹1,450-call and simultaneously selling ₹1,400-call of next month series. They closed at a premium of ₹3.7 and ₹47, respectively. This strategy will result in an initial inflow of ₹10,825, which could also be the maximum profit.

Maximum profit will occur if Axis Bank rises initially and falls from next month onwards. However, traders will incur loss if Axis Bank rises sharply after the expiry of the current month series.

In this strategy, the loss will be unlimited, if the stock surges sharply from next month series.

We advice traders to book their loss, if the premium surges to ₹15,000.

Follow-up: Last week, we had advised traders to consider a bull-put spread on L&T Finance Holdings.

As expected, the stock bounced back and traders could continue to hold on to their positions.

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Published on March 23, 2014
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