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The long-term outlook will remain negative for Bank of India (₹100) as long as it stays below ₹219. However, the short-term outlook has turned positive for the stock. If the current trend sustains, Bank of India can rise to ₹129. The next resistance appears at ₹147.
However, the stock finds immediate support at ₹92 and the next major one at ₹84.
F&O pointers: The BoI April futures added fresh long positions. Trading in options indicates that ₹100 could be a crucial level for the stock.
Strategy: Traders could consider a bull-call spread on Bank of India. This can be constructed by buying ₹100-April-call and simultaneously selling the ₹110-April-call. These calls closed with a premium of ₹5.90 and ₹2.30 respectively.
To adopt the strategy, traders have to fork out ₹3.6/option (or ₹10,800). This will be the maximum loss one can incur in this strategy. For that to happen, Bank of India has to close at or below ₹100.
However, a close at or above ₹110 will yield a maximum profit of ₹6.4./option (₹19,200). This strategy is for traders who can understand the risk associated with it. Besides, the April 5 RBI monetary policy can influence the share price movement in big way.
Traders can exit from the position if the loss mounts to ₹6,500. We advice the traders hold the position for at least two weeks.
Follow-up: Last week, we had advised traders to consider calendar spread on L&T. As advised, hold the April call option.
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