Technical Analysis

ICICI Bank: Spread a call ahead of result, Budget

| Updated on: Jan 21, 2018
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The outlook remains positive for the stock of ICICI Bank. The stock finds immediate support at ₹321 and the most crucial one at ₹290. If the current trend sustains, it could trend upwards and reach ₹410. The prospect of ICICI Bank hitting ₹410 appears bright.

F&O pointers: ICICI Bank February futures added a healthy open interest positions on Friday. Besides, rollover to February series from January remains modest at 13 per cent. Option trading indicates that the stock could face a hurdle at ₹370.

Events: There are two big events that could dictate the stock movement. The private bank will declare its Q3 results on January 31; and the Centre will present the Budget on February 1. Both these events will have a strong bearing on the movement of ICICI Bank.

Strategy: Traders can consider a bull-call calendar spread on ICICI Bank. This can be initiated by selling ₹350-strike call of the current month (January) and simultaneously buying the same strike call of next month (February) series. They closed with a premium of ₹7.75 and ₹17.70 respectively.

That means, one has to fork out ₹27362.50, (as market lot is 2,750 units/contract), which could be the maximum loss one can suffer. For that to happen, ICICI Bank has to close below ₹350 at the time of expiry.

On the other hand, the strategy has humongous profit potential, if ICICI Bank falls or remains flat at around ₹350 in the current month and rises sharply during the February series.

We advice traders to exit the position if the loss mounts to ₹10,000. Hold the position till the first week of February.

Published on January 21, 2018

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