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Gail (India) trades at ₹367. A conclusive close above ₹370 will confirm the bullish outlook and next resistance at ₹435. Immediate supports are at ₹347 and ₹323. A close below ₹323 would change the outlook to negative. The stock would then decline below ₹300.
F&O pointers: The counter witnessed a rollover of just 5 per cent into February series, indicating that traders prefer to remain cautious. Option trading indicates that the stock could find support at ₹350.
Strategy: Traders could consider a Calendar Bull call spread on Gail (India). This can be constructed by selling the ₹360 January call and simultaneously buying the ₹360 February call.
As the options closed with a premium of ₹12.75 and ₹16 respectively, one has to pay ₹4.75 or ₹5,600 (market lot 1,400/contract) to initiate this strategy.
While the maximum loss could be the premium paid (₹5,600), the strategy has unlimited profit potential.
If Gail (India) remains steady or declines till the expiry of January contracts, the short ₹360-call option will expire worthless, leaving the investor owning the long ₹360-February call. So, if the shares rise, post expiry, the strategy will yield better profits. You can hold with a stop loss at ₹2,800.
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