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The short and medium-term outlook remains negative for Tata Motors (₹328.4). One more conclusive close below ₹334 will confirm the downtrend and the stock could fall to ₹287. Resistance is at ₹382 and only a close above ₹486 will change the long-term outlook to positive.
F&O pointers: The stock added fresh shorts on Friday. Over 18 lakh shares were added in open interests. Call options indicates a strong resistance at ₹350, while puts indicate support at ₹320.
Strategy: A calendar spread using put options can be considered. Sell ₹330-September put while simultaneously buying the same-strike put option of October series. The options had closed at ₹7.90 and ₹18.10 respectively The strategy will entail an initial outflow of ₹10.2 or ₹5,100, which could be the maximum loss. For that to happen, Tata Motors has to settle at or above ₹330. However, profit potential is substantial, if Tata Motors remain resilient in the short term and falls in October. Hold the strategy for at least two weeks and exit next month if the loss mounts to ₹1,500.
Follow-up: Last week, we had advised strategies on Punjab National Bank. Traders could continue to hold them.
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