The following are Derivative calls for October Series or for different time frame as indicated against each strategy given by KARVY STOCK BROKING HOUSES:
The Nifty is expected to remain in a range of 4,700-5,000 levels. The 4,900 level should sustain in the near term and is extremely crucial for any recovery towards 5,000 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 reinforce bearish sentiment in the markets.
NIFTY:
Sell Nifty October futures @ 4,900* average: 4,950* stop loss: 5,000* target: 4,800, 4,750* (*spot levels)
NIFTY STRATEGY:
Short strangle: Sell one lot of Nifty 4,700 Oct PE @ 70-75 and sell one lot of Nifty 5,200 Oct CE @ 25-30; UBEP: 5,295; LBEP: 4,605; max profit: ` 4,750; max loss: unlimited.
Symbol Recomm Entry Stop Loss Target Time Frame
Oct5100CE Short 50-55 5000(Spot) 20-22 1 Week
Oct4700PE Short 70-75 4750(Spot) 40-45 1 Week
::DIFFERENT STRATEGIES::
HYBRID STRATEGY:
Bull-Call in Coal India: Coal India saw accumulation of long positions last week. The stock saw 15.8% addition in open interest with increase in cost-of-carry, from 2.85% to 5.85% last week. On the options front, Coal India saw buying across call and put option strikes. The maximum accumulation was evident in the 360 and 380 call strikes, while the 320-strike put option saw the highest addition. Technically, the stock has bounced back from its long-term support of 315-320 levels. We expect upward momentum to continue in the near term until 360-365 levels. Thus, we recommend a bull-call strategy on the stock.
Buy one Coal India Oct 340 CE @ 9-10 and sell one 360 CE @ 4-5; LBEP: 346; max profit: ` 14,000 if stock remains above 360; max loss: ` 6,000 if stock remains below 340.
Short Strangle in M&M: M&M saw accumulation of long positions last week. The stock saw 3% addition in open interest with no major change in cost-of-carry. On the options front, there was addition of short positions across call and put option strikes, indicating the stock to remain range-bound in the near term. Technically, it has been consolidating in a broad range of 760-820 levels in the last few weeks. We expect the stock to remain range-bound in the near term.
Sell one M&M Oct 760 PE @ 10-11 and sell one Sep 820 CE @ 13-15; UBEP: 843 and LBEP: 737; max profit: ` 12,000 if stock remains between 760 and 820 levels.
PAIR STRATEGY:
REC and PFC: REC and PFC have shown correlated movement in the past, with rolling price correlation of 80% in the last six-month data-set. REC had outperformed PFC in the recent past. The current price ratio of PFC and REC is 0.85. 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 0.95 and the current price ratio is more than 89 percentile away from the mean ratio. There is a high probability of convergence between the stocks from current levels.
Buy PFC one lot Oct futures and 150 shares @ 137-139 and sell one lot of REC Oct futures @ 161-162; current price ratio: 0.85; target: 0.95 and 0.98; SL: 0.78.
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.
