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The long-term outlook for Ashok Leyland (₹72.4) remains positive as long as it stays above ₹55.25. The stock finds immediate support at ₹68.5 and the next crucial one at ₹60.5. It can touch ₹96.5 if it sustains the current rally. However, the stock is likely to face stiff resistance in the near term and may turn weak.
F&O pointers: The stock shed open interest along with a fall in its price. This indicates a bearish trend. Option trading also indicates limited upside for the stock, as calls added open positions.
Strategy: Traders can consider a bear put spread on Ashok Leyland. This can be initiated by simultaneously buying 75 put and selling 70 put. This strategy will incur an initial outflow of ₹2.4/contract, as these options closed with a premium of ₹3.4 and ₹1.05, respectively.
Traders can earn a maximum profit of ₹2.4/contract if Ashok Leyland slips below ₹70 at the time of expiry.
However, traders can also suffer a maximum loss of ₹2.4 from this strategy, if the underlying stock settles at or above the upper strike price of ₹75. Since the market lot is 8,000 per contract, this strategy is best suited for traders who can bear high risks.
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