Sun Pharmaceutical Industries (₹639.6) is ruling at a crucial level. The stock finds support at ₹610 and the crucial one at ₹572. A close below the latter will confirm the bearish trend. Only a close above ₹724 will change the outlook positive. We expect the stock to move in the band between ₹610 and ₹720 in the medium term.

F&O pointers: The Sun Pharma futures witnessed a steady build up in open interest positions, despite the fall in underlying price. Option trading suggests limited downside, as ₹640-strike and ₹660-strike put options added open positions. Sun Pharma may face resistance at ₹700, where call options added more open positions.

Strategy: We suggest a calendar bull-call spread strategy for traders. This can be initiated by selling ₹640-call of April strike and simultaneously buying the same call option in May series.

While ₹640-strike April call closed at ₹8.25, the same strike in May closed at ₹23.05. With market lot being 700 shares, one has to shell out ₹10,360 to initiate the strategy. The maximum loss would be the premium paid, for which Sun Pharma has to close at or below at ₹640 at the time of May contract expiry. However, profit can be unlimited if Sun Pharma rallies in May. A close above ₹655 will start yielding profits.

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