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 4,700-5,000 in the near term. If the Index manages to find support at the 4,800 mark, it could gradually inch up towards 4,900-4,950 levels on the back of short-covering and fresh buying. Alternatively, a failure to sustain above the 4,800 mark will induce further selling pressure, thereby dragging the Nifty down immediately to lower supports of 4,700 levels and 4,500 levels in due course.
NIFTY:
Sell Nifty December futures @ 4,880-4,900* average: 4,950* stop loss: 5,000* targets: 4,800* & 4,750* (*spot levels)
NIFTY STRATEGY:
Long strangle: Buy 4900 CE @ 120-125 and Buy 4900 PE @ 135-140. Max profit: Unlimited and Maximum loss: 13250. UBEP: 5165 and LBEP: 4635. SL: 200 (Cumulative premium)
Symbol Recomm Entry Stop Loss Target Time Frame
Dec4800PE Long 90-95 4950(Spot) 120-125 1 Week
Dec5000CE Short 75-80 4950(Spot) 50-52 1 Week
::DIFFERENT STRATEGIES::
HYBRID STRATEGY:
Bear Put in DLF: DLF saw marginal activity in futures last week as it shed 0.19% in open interest with an increase in cost-of-carry from 1.81% to 4.27% in the last session. On options front, the 220-strike call option has the highest accumulation with 9,48,000 shares in open interest. In put options, the highest accumulation is in the 200 strike with 10,66,000 shares. The high accumulation in ATM call options points to downside moves ahead; hence, we recommend a bear-put strategy in the stock.
Buy one DLF Dec 220 PE @ 12 and sell one Dec 210 PE @ 7; BEP: 215; max profit: ` 5,000 if stock remains below 210; max loss: ` 5,000 if the stock expires above 220.
Bear Put in SAIL: SAIL saw addition of short positions last week as it added 11.6% in open interest with a price decline of 4.76%. On the options front, the 85-strike call option saw addition of short positions while the 85-strike put saw closure of shorts, indicating further downside from current levels.
Buy one SAIL Dec 85 PE @ 4-5 and sell one Dec 80 PE @ 2-2.5; BEP: 82.5; max profit: ` 5,000 if stock remains below 80; max loss: ` 5,000 if stock expires above 85.
PAIR STRATEGY:
GAIL and ONGC: GAIL and ONGC have seen correlated movements in the past, with rolling price correlation of 89% in the last six-month data-set. ONGC had outperformed GAIL in the recent past. The current price ratio of GAIL and ONGC is 1.46. The ratio is currently at higher levels, and we believe that it is likely to converge towards its mean level. The mean price ratio is 1.60 and the current price ratio is two standard deviations away from the mean ratio. There is a high probability of convergence between the stocks from current levels.
Buy GAIL one lot Dec futures and 170 shares @ 390-392 and sell one lot of ONGC Dec futures @ 263-265; current price ratio: 1.46; target: 1.56 and 1.60; SL: 1.38.
Best buys:
Symbol Option Entry SL Target TF
TCS Dec 1200C 17-18 10 32-33 9-10 Days
Tata Motors Dec 190C 3.5-4 2 7.5-8 7-8 Days
L&T Dec 1200P 27-28 18 46-48 12-13 Days
Writing attractions:
Symbol Option Entry SL* Target TF
ICICI Bank Dec 760C 22-24 765 4-5 7-8 Days
Bharti Dec 380C 5-6 382 - Expiry
Tata Steel Dec 420C 7.5-8 425 0.5-1 17-18 Days
* Spot levels
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.
