The following are Derivative calls for August Series or different time frame as indicated against each strategy given by KARVY STOCK BROKING HOUSE:
The Nifty is expected to remain in a range of 4,800-5,000 levels. The 4,800 level should sustain in the near term and is extremely crucial for any recovery towards 4,950-5,000. However, in our view, in the current scenario, the Index may continue to face stiff resistance around 5,000 levels and may remain weak in the short term. A breach of the 4,800 level will intensify the selling pressure.
NIFTY:
Sell Nifty September futures @ 4,900-4920* average: 4,980* stop loss: 5,000* target: 4,800* (*spot levels)
NIFTY STRATEGY:
Sell one Nifty Aug 4800 put @ 50-52 & sell one Nifty Aug 4900 call @ 45-47; Lower break-even point: 4705; Upper break-even point: 4995; Maximum profit: ` 4750 if Nifty expires in a range of 4800-4900.
Symbol Recomm Entry Stop Loss Target Time Frame
Aug5000CE Short 20-25 5000(Spot) - 1 Week
Sep4900PE Long 185-190 5000(Spot) 215-216 1 Week
::DIFFERENT STRATEGIES::
HYBRID STRATEGIES:
Call Ratio in Chambal Fertilizers: Chambal Fertilizers saw accumulation of long positions last week. The stock saw over 10% additions in open interest towards the weekend. On the options front, Chambal August call options saw buying since inception of the contract, while put options saw no major change in open interest. Chambal 105 and 110 call-option strikes witnessed maximum addition in open interest, indicating further upside in the stock from current levels. Technically, the stock has outperformed the broader market and is trading at its lifetime high. We expect momentum to continue this week to test 110 levels.
Buy one Chambal Aug 100 CE @2-2.5 and sell two 105 CE @ 0.75-1; LBEP: 101; UBEP: 109; max profit: ` 16,000 at 105 levels and max loss: ` 4,000 if it remained below 100.
Bear Put in L&T: L&T saw accumulation of short positions. The stock saw about 21% additions in open interest, with cost-of-carry of -2.16%. On the options front, ATM put option saw closure of short positions, indicating selling pressure will continue in the near term. Technically, the momentum indicators suggest a possible downturn in the short term to test its recent low of 1,480-1,500 levels.
Buy one L&T Aug 1550 PE @ 28-30 and sell one Aug 1500 PE@ 14-15; BEP: 1535; max profit: ` 8,750 below 1500 levels; max loss: ` 3,750 if the stock remains above 1550 levels.
PAIR STRATEGY:
Tata Motors and M&M: Tata Motors and M&M have shown correlated movement in the past, with rolling price correlation of 70% in the one-year data-set. M&M had outperformed Tata Motors in the recent past. The current price ratio of Tata Motors and M&M is 0.99. The ratio is currently trading around its lows and appears stretched; we believe that it is likely to revert to its mean levels. The mean price ratio is 1.57 and the current price ratio is more than 98 percentile away from the mean ratio. There is a high probability of convergence between the stocks from current levels.
Buy Tata Motors two lots Sep futures @ 713-715 and sell one lot M&M Sep futures @ 720-722; current price ratio: 0.99; target: 1.35 and 1.40; SL: 0.80.
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.
