Technical Analysis

Calendar bull spread on RCom

KS Badri Narayanan | Updated on January 23, 2018 Published on April 19, 2015

19RelcomCL.eps

While the long-term outlook remains negative for Reliance Communications (₹69.8), the stock could see some momentum in the near term. It finds crucial resistance at ₹74.5 and support at ₹66.7.

A close above ₹74.5 can take RCom to ₹81.3 and then to ₹97.90. On the other hand, a dip below ₹66.7 can take the stock towards ₹59. We expect the stock to remain volatile, particularly in the near term.

F&O pointers: RCom futures added 76,000 shares (0.17 per cent) in open positions on Friday. Trading pattern in options indicates that RCom may move in the range of ₹60-75 in the short term.

Strategy: Traders can consider a calendar call spread strategy on RCom using April and May options. This can be initiated by selling ₹70-call of April while simultaneously buying the same strike of May. They closed with a premium of ₹2.65 and ₹5 respectively.

The maximum possible loss will be the net premium paid, that is ₹2.35 in this strategy. Market lot is 2,000 units. However, profit potential is unlimited, if the stock pursues its upward momentum in May.

Published on April 19, 2015
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