Technical Analysis

L&T: Build on spread options 

KS BADRI NARAYANAN | Updated on January 20, 2018 Published on March 27, 2016


The short-term outlook for Larsen & Toubro (₹1,241.7) has turned positive. The stock now finds immediate resistance at ₹1,283 and the next one at ₹1,354. Immediate support is at ₹1,165 and a close below ₹999 will change the short-term outlook.

F&O pointers: Accumulation of long positions are seen in futures trading. However, L&T has witnessed a rollover of just 9 per cent to the April month series. Option trading in March series indicates ₹1,200 as a crucial level while April options point to a level of ₹1,300.

Strategy: Traders can consider a long call calendar spread on L&T. This can be initiated by selling 1,240-March call and simultaneously buying 1,240-April call. These options closed with a premium of ₹18 and ₹48.90 respectively.

Traders have to incur an initial outflow of ₹9,270 (market lot: 300 shares). The maximum loss in this strategy is the premium paid. For that to happen, L&T has to close at or below the strike price.

However, profits can be unlimited if L&T rises sharply. The position will turn positive only if L&T closes at or above the level of ₹1,289.

Published on March 27, 2016
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