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The outlook for NIfty-50 index futures (8,671) turned positive after its recent strong show. A close above 8,940 can take the index to new peaks. On the other hand, a conclusive close below 8,002 will alter the current positive outlook. With the Budget round the corner, the index could turn volatile, at least in the short term.
F&O pointers: Open interest for January contracts saw a sharp surge in the last few days. It climbed almost three times last week to 1.938 crore from 66.96 lakh. Option trading indicates that the index could move to 8,800-8,900 range.
Strategy: Traders can consider buying a plain vanilla option. They can buy 9,500-December call (the farthest option). The option closed with a premium of ₹264.55.
With the market lot being 75, outgo in this strategy would be close to ₹20,000. This would be the total loss one can suffer in this strategy. Loss would incur if Nifty futures fail to move upwards. On the other hand, a sharp surge in the index could result in gains.
We advice traders to cut their position at a loss of ₹8,500 or at a profit of ₹20,000.
Alternatively, traders with less risk appetite can consider buying 9000-Feb call, which closed with a premium of ₹28.65.
Follow-up: Hold Tata Chemicals long positions
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