Technical Analysis

Future Perfect: Consider calendar put-spread strategy on Maruti

KS Badri Narayanan | Updated on July 21, 2019 Published on July 21, 2019

The short-term outlook remained negative for Maruti Suzuki (₹5,768.9). The long-term outlook will turn positive only if Maruti Suzuki breaks ₹6,513 comfortably. If the stock maintains the current downtrend, it could reach ₹5,144, where it finds major support. A break below this level could trigger a heavy fall for Maruti Suzuki.

F&O pointers: Maruti Suzuki futures witnessed a rollover of 17 per cent to next month series. The August futures at ₹5,726.70 trades at a discount to the spot price. This was due to the dividend payout of ₹80 for which the company has fixed August 14 as ex-date, after which the August futures will revert to normal premium mode over the spot price. Option trading indicates a range of ₹5,600-6,000 for the stock.



Strategy: Shares could see instant movement once Maruti Suzuki’s quarterly results are declared on July 26.

As we see negative bias for the stock, traders can consider a calendar put-spread strategy on Maruti. This can be initiated by selling the current month ₹5,800-strike-put (₹90.05) and, simultaneously, buying the same strike August put (₹281.05). This strategy will cost traders ₹14,325 as the market lot is 75 shares.

The maximum loss would be the premium paid (₹14,325) and that will happen if the stock rises and closes above ₹5,800 in August.

Potential for profit will be very high, if the stock rises in the immediate term and falls from July 26 (next month series). Hold the position till the third week of August and exit if the loss mounts to ₹7,500 or at a profit ₹15,000.

Follow-up: Those who did not book profits when YES Bank surged may do so during the downside too.

Published on July 21, 2019
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