Reliance Power (₹96): After a long slumber, the stock of Reliance Power is showing some bullish signs thanks to the recent surge. However, only a close above ₹116 will change the long-term outlook positive.
The immediate support is at ₹92 and the next is at ₹77. A conclusive close below this level will change the long-term outlook negative once again.
F&O pointers: The counter witnessed a healthy rollover of 24 per cent to June series. Most of the rollovers were on the long side, indicating traders’ optimism. Option trading also indicates a positive bias.
Strategy: Traders could consider a calendar spread involving options of different months. This can be initiated by selling ₹97.5-call of May series while simultaneously buying the call option of June series at the same strike. While the former is commanding a premium of ₹2.9, the latter on Friday closed at ₹8.45. This will entail a net outgo of ₹22,200 to traders, as the market lot is 4,000. This will be the maximum loss in this strategy.
This will occur if Reliance Power stays at or declines from current levels. Maximum profit is unlimited should Reliance Power continue its strong rally as envisaged. If the rally happens in the month of June, traders could pocket a neat profit. Any close above ₹103 will start yielding positive gains for the position.
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