Technical Analysis

Future Perfect: Coal India in a positive bias

K S BADRI NARAYANAN | Updated on March 09, 2018 Published on July 23, 2017

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Though the long-term outlook remains bearish for Coal India (₹262), in the short term, the stock may remain resilient. If the current trend sustains and maintains above ₹258, Coal India can rise to ₹285.

Only a close above ₹346 will change the long-term outlook to positive for the stock. A close below ₹247 will reconfirm the negative trend for the short term.

F&O pointers: With just four days for the expiry of July contracts, Coal India saw a rollover of 14 per cent to August series. Most of the rollovers were on the long side. Option trading indicates a range of ₹240-₹260.

Strategy: Traders can consider a calendar bull spread. This can be initiated by selling ₹260-call of the current series and simultaneously buying the same strike in August series. The options closed with a premium of ₹3.85 and ₹9.10 respectively.

That means one has to pay ₹5.25/contract, which will work out to ₹8,925.

Total loss in the strategy would be the premium paid that occurs if Coal India settles at or below ₹260 at the time of August expiry.

However, profits will be unlimited if the stock slips immediately (during the current series) and jumps in August month. A close above ₹265.25 will make the position break-even. Hold the strategy till the expiry of August series.

Follow-up: Though Max Financial has not moved on expected lines, investors should continue holding the positions.

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Published on July 23, 2017
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