Technical Analysis

Future Perfect: SAIL through with call options

KS BADRI NARAYANAN | Updated on January 08, 2018

The stock of Steel Authority of India Ltd (SAIL) closed at ₹97.75 and is ruling at a crucial level. The medium-term outlook will turn positive only if the stock manages to close above ₹108. The stock finds an immediate support at ₹82.95. As long as it holds above ₹66, the short-term outlook remains positive. A close above the key resistance at ₹108 can lift SAIL upwards to ₹151.

F&O pointers: The SAIL January futures witnessed unwinding of 66.72 lakh shares on Friday along with fall in share price. On Thursday too SAIL futures shed open interest, indicating profit taking. Option trading indicates that SAIL has a strong support at ₹90 and resistance at ₹100.

Strategy: Traders could consider a bull-call spread on SAIL. This can be initiated by selling ₹102.5-strike call that closed at ₹2.35 and simultaneously buying the ₹100-strike-call, which closed at ₹3.15.

This will ensure an initial outflow of ₹9,600, as the market lot is 12,000 per unit, while the maximum is the premium incurred and that will happen if SAIL fails to rise this month. A profit of ₹20,400 is possible, if SAIL moves past ₹102.50 before expiry.

We advise traders to exit the position if the loss mounts to ₹6,000 and consider holding for at least two weeks.

Alternatively, traders with the ability to take high risks and withstand huge swings can consider going long on SAIL futures with a trailing stop-loss at ₹85.

Follow-up: RPower strategy would have yielded desired profit potentials.

Published on January 07, 2018

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