Technical Analysis

Future Perfect: Consider bull call spread on ITC

KS Badri Narayanan | Updated on September 22, 2019 Published on September 22, 2019

The stock of ITC (₹238) is ruling at a crucial level. It finds an important support at ₹226, a close below which will trigger a fresh down-slide on the stock. An immediate resistance appears at ₹253; a close above that will change the immediate-term outlook positive. In that event, the stock could rally up to ₹275 or even to ₹296.

F&O Pointer: Despite the market surging on Friday, the stock of ITC closed almost on a flat note. It also witnessed a roll-over of 5 per cent to October series. Trading in option indicates a range of ₹230-250 for the stock.

Strategy: Traders could consider a calendar bull spread on ITC. This can be initiated by selling the current month ₹235-call and simultaneously buying the next month’s contract. As these closed with premiums of ₹7.10 and ₹11.05, respectively, traders have to shell out ₹9,480.

 

 

This will be the maximum loss one can suffer in this strategy, which will happen if ITC rises during this month and closes below at ₹235 the next month.

On the other hand, profit potentials are very high if ITC falls or stays at the current levels and moves up in the next month’s series vigorously. We advise traders to hold the position for at least three weeks.

Follow-up: As advised, hold SAIL position and close it on the expiry day.

Published on September 22, 2019
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