Technical Analysis

Future perfect: Long strangle on Ashok Leyland

KS Badri Narayanan | Updated on November 04, 2018 Published on November 04, 2018

Shares of Ashok Leyland remain at a crucial level. The stock finds key support at ₹107 and a major one at ₹98. A close below the latter will alter the long-term bullish view on the stock. On the other hand, immediate resistance is at ₹129 and only a close above ₹151 will trigger a fresh rally in the stock. Still such time, the stock could hover in the ₹151-107.

F&O pointers: Despite recovering sharply on Friday, Ashok Leyland November futures witnessed massive unwinding of open positions; it shed 62.28 lakh shares (or 12.61 per cent) in open positions. Option trading indicates that Ashok Leyland can move between ₹150 and ₹100.

Event: The automobile major will declare its Q2 results on November 13. So, shares could react to the numbers.

Strategy: We advice traders to consider a long strangle strategy on Ashok Leyland by simultaneously buying a ₹135-call, which closed at ₹1.05, and buying the ₹105-put that closed at ₹1.55.

This would cost ₹10,400 to traders and the initial cost paid would be the maximum loss one can suffer in this strategy, if the stock stays between the strike prices at the time of expiry.

On the other hand, profit potentials are very high, if Ashok Leyland makes a sharp movement in any one of the directions — up or down. Any close above ₹137.7 or below ₹102.4 will turn the position profitable.

Published on November 04, 2018
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