The long-term outlook will remain positive for Arvind (₹272.55), as long as it stays above ₹242. In the short term, the stock may move in a narrow range with a positive bias. It finds immediate resistance at ₹291 and support at ₹255. However, a close below ₹222 will change the outlook to negative for the stock.

F&O pointers: The contract added 3.88 lakh shares in open interest on Friday. In fact, Arvind’s October contract has been witnessing accumulation of open interest throughout last week amidst price fall.

This suggests build-up of short positions. Option trading in calls indicates that the stock could face a strong resistance at ₹300.

Strategy: Traders can consider a bull-call spread on Arvind. This strategy is best suited provided the immediate-term outlook is positive.

Here, the strategy can be executed by selling ₹290-call and simultaneously buying ₹280-call, which closed with a premium of ₹7 and ₹10.85 respectively.

This strategy will result in an outflow of ₹3.85 per contract (₹3,850), which will be the maximum loss one can suffer. For that to happen, Arvind has to close below ₹280.

A maximum profit of ₹6.15 per contract (₹6,150) is possible, if Arvind closes at or above ₹290 at the time of expiry. This strategy is break-even at expiration if the stock price rules at ₹283.85. We advice traders to hold the position till October expiry or the underlying stock hits ₹290 or the loss mounts to ₹1,000.

Related Topics