Technical Analysis

Consider bull spread on Lupin

| | Updated on: Oct 29, 2017
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While the medium-term outlook for Lupin (₹1,001) remains negative, in the short term, the stock may see some upswing. Support is at ₹923 and resistances are at ₹1,043 and ₹1,110.

A close above ₹1,182 will change the medium outlook also positive.

F&O pointers: The counter has been accumulating long positions throughout last week.

From just 4.05 lakh shares on October 19, open interest jumped to 81.65 lakh shares. Option trading indicates Lupin could face resistance at ₹1,100.

Strategy: Traders can consider a bull call spread on Lupin.

This strategy can be initiated by selling 1000-strike call and simultaneously buying the 1040-strike. These calls closed with a premium of ₹47 and ₹30.25 respectively, implying an outflow of ₹16.75 a contract.

Total loss would be the premium incurred, which is ₹6,700, as market lot is 400 shares.

Maximum loss will happen if the stock closes at or below ₹1,000 at the time of expiry.

On the other hand, a maximum profit of ₹9,300 is possible if Lupin closes at or above ₹1,040.

Traders with high risk appetite can even consider buying the 1040-call, which closed at ₹30.25.

While the loss could be ₹12,100, profit potentials are unlimited if the stock surges above ₹1,070 in this series.

As Lupin is set to declare its result on October 30, the stock could see a wild swing.

Follow-up: Book profits in Havells India.

Published on January 09, 2018

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