Future Perfect: Consider a put option on Sun TV

 

The outlook remains weak for the stock of Sun TV Network (₹448.4). The stock rules at a crucial level and finds major support at ₹438.

A close below that level can drag the stock towards ₹371 or even ₹341. It finds resistance at ₹491, and only a close above ₹537 will clear the immediate negative outlook for the stock. The downtrend is expected to continue.

F&O pointers: The Sun TV futures witnessed a steady decline in open interests in the last two weeks from 56.27 lakh shares to 52.55 lakh shares along with drop in share price. The current month futures also trades at a slight discount, indicating lack of trader interest. Option trading indicates a wide range of ₹400-500.

 

Strategy: Traders can consider buying ₹460-put option on Sun TV. The put closed with a premium of ₹16.10. As the market lot is 1,000 shares, it will cost investors ₹16,100, which would be the maximum loss one can suffer.

That will happen if the stock moves up and stays above ₹460. But one can make profits if Sun TV slips sharply in the next few days.

While ₹463.90 is a break-even point, a close below that level will start yielding positive results.

Traders can consider exiting the position if the loss mounts to ₹8,500 and hold for at least two weeks with trailing stop-loss.

Traders with an appetite for high risk can consider shorting Sun TV with a stop-loss at ₹464, which can be shifted to ₹448 if the stock opens on a negative note for an initial target of ₹425.

Follow up: Hold ICICI Bank positions.

Published on August 11, 2019

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