Technical Analysis

Future Perfect: Consider long strangle on Havells India

K S Badri Narayanan | Updated on January 08, 2018

Consider long strangle on Havells India

The long-term outlook remains positive for Havells India (₹547), as long as it rules above ₹440. The stock finds immediate support at ₹510 and a close below this level can weaken it to ₹472. On the other hand, if the stock sustains the current bullish trend, it can reach ₹610. However, we expect Havells India to display a volatile trading pattern before taking a clear trend.

F&O pointers: Havells India October futures added fresh long positions in the last few days. Since October 13, open interest surged from 37.88 lakh shares to 43.48 lakh shares. Options are not very active. Trading cues indicate that the stock will hover at ₹550.

Strategy: Traders can consider a long strangle on Havells India, as the company is scheduled to announce results of quarter ended September 30, on Monday. The stock will swing wildly on either side based on performance. Traders can consider buying ₹570-strike call and ₹520-strike put, which closed with a premium of ₹4.15 and ₹2.60 respectively.

The total loss in this strategy would be the premium paid, which works out to ₹13,500 (as the market lot is 2,000 shares). This will happen if the stock of Havells India fails to move in any one of the directions in the current month series itself.

However, the profit potentials are huge, if the stock travels vigorously in any one of the directions. A close above ₹576 or below ₹513 will start yielding positive returns. Traders can hold the position till expiry or exit if the premium paid dips to ₹8,000.

Follow-up: Hold Power Grid positions.

Published on October 22, 2017

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