The long-term outlook remains positive for the stock of Arvind, as long as it stays above ₹309. However, in the short term, the stock is likely to move in a narrow range with negative bias. Immediate resistance is at ₹413 and support is at ₹368. A close below the latter will drag the stock towards ₹330. On the other hand, a conclusive close above ₹413 will reconfirm the positive outlook for the stock, which will help it scale new heights.
Strategy: We advice a calender put spread strategy for traders. This can be initiated by buying 380-put of March series and simultaneously selling the current month same strike of Arvind. These options closed with a premium of ₹12.40 and ₹3.35, respectively. That means, one has to fork out ₹18,100 to adopt the strategy, as the market lot is 2,000 shares.
The maximum loss one can suffer in this strategy is the premium paid (₹18,100), which can happen if the stock rises sharply and closes above ₹390. On the other hand, profit potential is very high if Arvind manages to slip below the break even point of ₹370 at the time of expiry.
Follow-up: Though Sun TV hit our expected target in the latter part of the week, it also triggered stop loss. Those holding can book profits.