The following are Derivative calls for December Series for different time frame as indicated against each strategy given by KARVY STOCK BROKING HOUSE:
The market is expected to remain in the broad range of 4,500-4,800 in the near term. If the Index manages to climb and sustain past the 4,700 mark, it could gradually inch up towards 4,800 levels on the back of short-covering. Alternately, a failure to sustain above the 4,700 mark will induce further selling pressure, thereby dragging the Nifty down immediately to lower supports of 4,600 levels and 4,500 levels in due course.
NIFTY:
Sell Nifty December futures below 4,640* average: 4,750* stoploss: 4,800* target: 4,550*, 4,500* (*spot levels)
NIFTY STRATEGY:
Bear Put Spread: Buy 4600 PE @ 85-90 and Sell 4500 PE @ 50-55. Max Profits: ` 1750 and Max Loss: ` 3250. BEP: 4565
Symbol Recomm Entry Stop Loss Target Time Frame
Dec4600PE Long 75-80 4750(Spot) 108-110 1 Week
Dec4800CE Short 40-45 4750(Spot) 20-22 1 Week
::DIFFERENT STRATEGIES::
HYBRID STRATEGY:
Protective Call in Axis Bank: Axis Bank futures saw fresh addition of short positions in the last session as the stock added 21.86% in open interest with a decrease in cost-of-carry from -22% to -58.4%. On the options front, the 900-strike put option has marginal open interest with 46,500 shares in open interest. In call options, the highest accumulation is in the 1000 strike with 3,59,000 shares. The high accumulation of shorts in the futures segment along with marginal activity in puts points to further downsides ahead. Hence, we recommend a protective call strategy in the stock.
Sell one Axis Bank Dec futures @ 885-888 and buy Dec 900 CE @ 20; BEP: 875; max profit: unlimited if stock remains below 880; max loss: ` 8,250 if stock expires at 900.
Bear Put in L&T: L&T futures saw addition of short positions in the last session as it added 6.94% in open interest with an increase in cost-of-carry from 11.04% to 13.6%. On the options front, the 1200-strike call option saw addition of short positions while the 1100-strike put saw addition of longs, indicative of further downside from current levels.
Buy one L&T Dec 1100 PE @ 60 and sell one Dec 1050 PE @ 30; BEP: 1070; max profit: ` 5,000 if stock remains below 1050; max loss: ` 7,500 if stock expires above 1100.
PAIR STRATEGY:
Cipla and Lupin: Cipla and Lupin have seen correlated movements in the past, with rolling-price correlation of 60% in the last one year
data-set. Cipla had outperformed Lupin in the recent past. The current price ratio of Cipla and Lupin is 0.78. The ratio is currently trading around the lower band; we believe that it is likely to divert further from mean levels. The mean price ratio is 0.66 and the current price ratio is 98 percentile away from the mean ratio. There is a high probability of divergence between the stocks from current levels.
Buy Cipla one lot Dec futures and 300 shares @ 328-332 and sell two lots of Lupin Dec futures @ 430-432; current price ratio: 0.78; Target: 0.90 and 0.94; SL: 0.66.
NOTE: ALL ARE REQUESTED TO TRADE ON THEIR OWN DECISION/RISK AND WITH STRICT STOPLOSS. Please understand that by following stop losses, you can restrict your losses if the market goes against you. Please ensure that if you are taking any position in the F&O market, you strictly abide by the recommended stop loss. It is not advisable to get involved in complex F&O strategies if you have just started to trade in derivatives. Start with simple trades like buying and selling the Nifty and buying and selling stock futures of the 10 most liquid stocks in the F&O segment. Once you are comfortable with these basic futures transactions, you can gradually move on to buying call and put options. However, remember that writing of call and put options should only be taken up by informed investors.
