Technical Analysis

Consider short strangle on ONGC

KS BADRI NARAYANAN | Updated on August 24, 2014 Published on August 24, 2014

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The long-term outlook for ONGC will remain positive as long as the stock trades above ₹336. ONGC has immediate support at ₹411. A close below this level can take the stock lower to ₹391. ONGC finds immediate resistance at ₹449 and a conclusive close above this level can take the stock to new highs.

F&O pointers: ONGC futures witnessed a roll-over of about 16 per cent to the September series. The premium for September futures narrowed, indicating that roll-overs are not aggressive. Option trading indicates a range of ₹400-450 for the stock.

Strategy: Traders can consider short strangle on ONGC. This can be initiated by selling ₹400 put and ₹460 call. They closed at ₹4.5 and ₹7 respectively.

Short strangle strategy is best suited when one expects the underlying stock to move in a narrow range. Maximum profit is the premium collected, which works to ₹11,500. On the other hand, loss could be unlimited if ONGC moves wildly in any one direction.

Loss will start mounting if ONGC closes below ₹388.5 or above ₹471.5. Market lot is 1,000 shares per contract.

Published on August 24, 2014
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