Technical Analysis

Go for calendar spread on Infosys

KS BADRI NARAYANAN | Updated on January 16, 2018 Published on October 09, 2016

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The outlook for the Infosys (₹1,012) stock remains neutral. It finds immediate support at ₹932 and a close below will change the outlook to negative. A decisive close below the key support level can drag the stock towards ₹743. Similarly, only a close above key resistance at ₹1,155 will change the outlook positive for Infosys. The stock will be volatile this week as the company is announcing its Q2 financial performance on October 14.

F&O pointers: Infosys futures added fresh short positions on Friday. The Infosys October futures closed in discount at ₹1,007 against the spot price of ₹1,012. Option trading indicates that the stock is likely to move in the ₹1,000- ₹1,100 band where there is strong concentration of open interests.

Strategy: Traders can consider a calendar spread on Infosys. This can be initiated by selling ₹1040-call of October series while simultaneously buying the same strike call of November series. They closed with a premium of ₹23.10 and ₹33 respectively. One has to pay ₹9.9/contract to build the position. In absolute terms, it works out to ₹4,950, as the market lot is 500 shares per contract. This will be the maximum loss one can suffer if Infosys rises sharply in October and falls below ₹1,040 in November. But the profit potentials are unlimited in this strategy, if Infosys struggles in the immediate time period and rises sharply in November. Selling option involves margin commitments. So this strategy is for traders who can withstand margin pressure. Hold the positions for at least three to four weeks.

Published on October 09, 2016
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