The following are Derivative calls for August Series or different time frame as indicated against each strategy given by KARVY STOCK BROKING HOUSES:
The Nifty is expected to remain in a range of 4,950-5,200 levels. The 5,200 level should sustain in the near term and is extremely crucial for any recovery towards the 5,350 mark. However, in our view, in the current scenario, the Index may continue to face stiff resistance around 5,200 levels and may remain weak in the short term. A breach of the 4,950 level will lead to increased selling pressure.
NIFTY:
Sell Nifty August futures @ 5,100-5120* average: 5,180* stop loss: 5,220* target: 5,000* (*spot levels)
NIFTY STRATEGY:
Buy one Nifty Aug 4900 put @ 45-47 & sell one Nifty Aug 5200 call @ 45-47; Lower break-even point: 4810; Upper break-even point: 5290; Maximum profit: ` 4500 if Nifty expires in a range of 4900-5200.
Symbol Recomm Entry Stop Loss Target Time Frame
Aug5200CE Short 45-50 5220(Spot) 25-26 1 Week
Aug4900PE Short 45-50 4950(Spot) 25-26 1 Week
::DIFFERENT STRATEGIES::
HYBRID STRATEGIES:
Bull-call spread in SBI: SBI has been range-bound over the last week. The stock saw accumulation of long positions. On the options front, OTM August-series call options witnessed addition of long positions while OTM put options saw writing, indicating the stock is likely to trade on a positive note in the near term. Technically, it looks likely to touch 2,350 levels once it crosses 2,230-2,250 levels. In such a scenario, we suggest a bull-call spread on the stock at current levels.
Buy one Aug 2200 call @ 66-68 and sell one Aug 2250 call @ 48-50; UBEP: 2220; max profit: ` 3,750 if the stock expires above 2250 levels; max loss: ` 2,500 if the stock expires below 2200 levels.
Short strangle in Bharti: Bharti has been trading on a negative note over the last couple of trading sessions. Technically, the stock has broken 405 levels. However, it is likely to find support at 375 levels. Both OTM put and call options saw writing, indicating the stock is likely to range-bound in the near term. The maximum open interest is currently at the 440-strike August call option. In the current scenario, we recommend a short strangle spread strategy.
Sell one Aug 380 put and sell one Aug 400 call @ a cumulative premium of 10-11; UBEP: 410; LBEP: 370; max profit: ` 10,000 if the stock expires between 380 and 400 levels.
PAIR STRATEGY:
Orchid Chemicals and Dr Reddy’s: Orchid Chemicals and Dr Reddy’s have shown correlated movement in the past, with rolling price correlation of 70% on the one-year data-set. Dr Reddy’s had outperformed Orchid Chem in the recent past. The current price ratio of Orchid Chem and Dr Reddy’s is 0.14. The ratio is currently trading around its highs and appears stretched; we believe that it is likely to revert to its mean levels. The mean price ratio is 0.20 and the current price ratio is more than 2.35 Z-score away from the mean ratio. There is a high probability of convergence between the stocks from current levels.
Buy Orchid Chem one lot August futures @ 196-198 and sell one lot Dr Reddy’s August futures @ 1493-1495; current price ratio: 0.14; target: 0.18 and 0.20; SL: 0.10.
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.
