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The stock of Tata Motors (₹433) rules at a crucial level. Supports are at ₹410 and at ₹382. A conclusive close below this level will change the outlook to negative. The stock could touch ₹345. Resistance is at ₹478 and a close above ₹520 is needed to reconfirm the positive outlook.
F&O pointers: Tata Motors futures added open interest in December contract on Friday, signalling value buying. Option trading indicates a strong support at ₹400 and resistances at ₹480 and at ₹500 levels.
Strategy: Traders can consider a bear-call strategy by selling ₹400-call and simultaneously buying the ₹420-call. They have closed with a premium of ₹40.50 and ₹27.30 respectively.
That means, one will earn a maximum profit of ₹13.2/contract from this strategy. In absolute terms, it works out to ₹19,800, as the market lot is 1,500 shares per contract. For that to happen, Tata Motors has to close at or below ₹400 at the time of expiry.
On the other hand, a loss of ₹6.8/contract or ₹10.200 is possible should the stock reverse and close at or above ₹440 at the time of expiry.
Hold the positions for at least two to three weeks. Consider exiting , if the loss mounts to ₹7,800.
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