Technical Analysis

Calendar spread on Karnataka Bank

K S Badri Narayanan | Updated on January 09, 2018


The Karnataka Bank (₹151.5) rules at a crucial level. Immediate resistance is at ₹159, a close above which could trigger a fresh rally to ₹235.

Support is at ₹139 and a close below ₹125 will change the short-term outlook to negative. Long-term positive view will remain intact as long as the stock rules above ₹102.

F&O pointers: Just about 10 per cent rollover signals a marginal build up of long positions in the September series. Option trading indicates that ₹160 is a crucial level.

Strategy: We advice calendar spread on Karnataka Bank by selling ₹150-call of August series and simultaneously buying ₹150 September-call.

They closed with a premium of ₹3.95 and ₹7.15 respectively.

One has to invest ₹12,160 (3,800 shares per lot) to initiate the strategy.

The total loss one can suffer in this strategy is the premium paid (₹12,160), for which Karnataka Bank has to settle at or below ₹150.

Profit potential is limited, especially, if the stock loses value immediately and gains momentum in September.

A close above ₹157.15 will start yielding positive results. Conservative traders can stay away from this.

Follow-up: Exit from TVS Motor option.

Published on August 27, 2017

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