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The outlook for Ashok Leyland (₹79.6) will remain negative as long as it stays below ₹92.30. The stock finds immediate support at ₹65.1 and resistance at ₹83.90. The long-term outlook will turn positive only on a close above ₹97.30.
We expect the stock to move in a narrow range with a negative bias in the short term.
F&O pointers: Ashok Leyland witnessed a roll-over (open positions to October series) of about 79 per cent, which is marginally lower than the previous month's average.
Despite a strong recovery in the underlying stock, Ashok Leyland futures shed 20.09 shares (2.3 per cent) in open interest on Friday, signalling that traders prefer to book profits rather than rolling over their positions. Option trading indicates a range of ₹75 and ₹90 for Ashok Leyland.
Strategy: Traders can buy 75-put on Ashok Leyland, which closed on Friday at ₹1.80. With market lot being 7,000 shares per contract, the total outgo works out to ₹12,600, which could be the maximum loss one can incur in this strategy. while profit could be unlimited if Ashok Leyland slides below ₹75 sharply.
A close at or above ₹76.80 will start hurting traders. We advice traders to book profits if the option premium rises to ₹3.5 or drops to ₹0.75. They can consider holding the position for at least two weeks.
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