Technical Analysis

Bet on SBI with calendar spread

KS Badri Narayanan | Updated on January 23, 2018 Published on May 24, 2015

The stock of SBI (₹282) took a knock after the bank announced its March quarter results on Friday. However, the stock’s long-term outlook remains positive. We expect it to move within a range for a while, but with a negative bias. The stock finds immediate resistance at ₹291 and support at ₹267. A close above its resistance can take it higher to ₹322.

F&O pointers: The counter witnessed a rollover of just 21 per cent to June series. On Friday, it witnessed heavy build-up of short positions in futures. Option trading indicates that the stock will face stiff resistance at ₹300.

Strategy: Traders can consider a calendar bull call spread on SBI. This can be initiated by buying SBI 280 June call and simultaneously selling the May call at the same strike price. The options closed with a premium of ₹12.35 and ₹5.60 respectively. This will entail an initial outflow of ₹6.75/contract (or about ₹8,450), which is the maximum loss one can suffer in this strategy. For that to happen, SBI has to settle at or below ₹280 at the time of expiry in June.

On the other hand, if SBI manages to close above the level of ₹286.75, the position will turn positive. We advise traders to hold this strategy till the expiry of June series.

Follow-up: Hold NTPC positions.

Published on May 24, 2015
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