The following are Derivative calls for October 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 4,900-5,100 levels. The 4,900 level should sustain in the near term and is extremely crucial for any recovery towards 5,100 levels. However, in our view, given the heightened uncertainty in the markets, the Index is expected to remain range-bound and highly volatile. Moreover, any breach of the lower range is expected to accentuate the bearish sentiment in the markets.
NIFTY:
Sell Nifty October futures @ 4,980-5,000* average: 5,050* stop loss: 5,100* target: 4,900* (*spot levels).
NIFTY STRATEGY:
Short strangle: Sell 1 lot of Nifty 5200 CE @ 40-45 and Sell 1 lot of Nifty 4700 PE @ 75-80. UBEP: 5315 and LBEP: 4585; Max Profit: ` 5750; Max Loss: Unlimited.
Symbol Recomm Entry Stop Loss Target Time Frame
Oct5100CE Short 80-85 5050(Spot) 50-52 1 Week
Oct4900PE Long 130-135 5100(Spot) 165-166 1 Week
::DIFFERENT STRATEGIES::
HYBRID STRATEGY:
Bear-Put Tata Steel: Tata Steel saw accumulation of short positions last week. The stock saw 62% rollover which is below its three-month average of 77.81%. In regard to options, Tata Steel call and put option strikes witnessed buying. The maximum accumulation is seen in the 460 and 440 call-option strikes while the 400-strike put option saw the highest addition. Technically, the counter looks weak and is likely to test its immediate support at 380 levels. Thus, we recommend a bear put strategy in the stock.
Buy one Tata Steel Oct 400 CE @17-19 and sell one 380 PE@ 12-13; LBEP: 393; max profit: ` 6,500 if stock remains below 380; max loss: ` 3,500 if stock remains above 400.
Bear-Put in Reliance Capital: Reliance Capital saw accumulation of short positions last Friday. The stock saw 100% rollover into the October series, mainly on the short side. On the options front, ATM call and put options saw addition of long positions, indicating the stock is likely to remain volatile in the near term. Technically, the counter breached all its crucial supports last week. The momentum indicators signal that selling pressure is likely to continue in the near future. Thus, we recommend a bear-put strategy in the stock.
Buy one Rel Cap Oct 300 PE @ 23-25 and sell one Sep 260 PE@ 11-12; BEP: 287; max profit: ` 13,500 below 260 levels; max loss: ` 6,500 if stock remains above 300 levels.
PAIR STRATEGY:
Tata Steel and Jindal Steel: Tata Steel and Jindal Steel have shown correlated movement in the past, with rolling price correlation of 94% in the six-month data-set. Jindal Steel had outperformed Tata Steel in the recent past. The current price ratio of Tata Steel and Jindal Steel is 0.84. 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 0.92 and the current price ratio is more than 2.76 Z-score away from the mean ratio. There is a high probability of convergence between the stocks from current levels.
Buy Tata Steel one lot Oct futures and 115 shares @ 405-408 and sell one lot of Jindal Steel Oct futures @ 500-504; current price ratio: 0.84; target: 0.88 and 0.92; 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.
