The stock of Infosys (₹972) remains facing a crucial support level. A conclusive below the support of ₹932 will change the outlook to negative. A decisive close below this key support level can drag the stock towards ₹743. The stock finds immediate resistance at ₹1,047. The stock will be volatile this week as the company is announcing its Q3 earinings on January 13.

F&O pointers: Infosys futures added fresh short positions on Friday. The Infosys January futures closed in at ₹976.2 against the spot price of ₹972. Option trading indicates that the stock is likely to move in the ₹900- ₹1,000 band where there is strong concentration of open interest positions.

Strategy: Traders can consider a strangle spread on Infosys. This can be initiated by buying ₹1,020-call and ₹940-put. They closed with a premium of ₹14.85 and ₹15.75 respectively. That means, to construct a long strangle on Infosys, one has to pay ₹30.6/contract. In absolute terms, it works out to ₹15,300, as the market lot is 500 shares per contract.

This will be the maximum loss one can suffer if Infosys closes between the strike price at the time of expiry. Exit the position if the loss mounts to ₹10,000.

But the profit potentials are unlimited in this strategy, if Infosys moves sharply either up or down. If one goes by recent history, Infosys shares have been swinging in the range of 7- 12 per cent on result days. A close above ₹1,050 or below ₹909 will ensure the position is profitable. Hold the positions for at least two weeks.

Follow-up: Hold long positions in Arvind.

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