Friday, December 9

F&O Strategy: Consider bear put strategy on L&T Finance

The stock of L&T Finance Holdings (₹87.55) remains at a crucial level. The stock finds an immediate resistance at ₹95 and only a close above ₹125 will change the long-term outlook positive. On the other hand, the stock finds an immediate support at ₹80 and a close below could drag it towards ₹72. A break below ₹72 can trigger fresh downslide that can drag the stock towards ₹65. On Friday, the company came out with results and the performance was on expected lines. Traders should also bear in mind that the stock might see a volatile opening on Monday post Q4 results.

F&O pointers: The counter witnessed a rollover of about 75 per cent to May series (from April) that is lower than previous month’s 82 per cent. However, L&T May futures witnessed a steady accumulation of open interest (OI) in the last couple of weeks from 35.69 lakh shares to 5.63 crore shares along with rise in share price. Option trading indicates a potential range of ₹80-95.

Strategy: We advise traders to consider a bear-put strategy on L&T Finance Holdings. This can be constructed by buying 85-put and simultaneously selling 80-strike. These options closed with a premium of ₹3.50 and ₹1.85. As the market lot is 8,924 shares, this will cost investors ₹14,724.60 (or ₹1.65), which will be the maximum loss one can suffer. Maximum loss will happen if L&T Finance rules at or above ₹85 on expiry.

On the other hand, a profit of ₹29,895.40 (or ₹3.35/lot) is possible, if L&T Finance dips to ₹80 and below. We advise traders to hold the position till expiry.

Note: The recommendations are based on technical analysis and F&O positions. There is a risk of loss in trading.

Published on

April 30, 2022

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