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DLF: The long-term outlook for DLF remains negative as long as it rules below Rs 390. However, the immediate outlook appears neutral and the stock might move in a band of Rs 215 and Rs 265.
The stock is currently hovering around Rs 235, the midpoint of the above mentioned range.
If the stock dips below Rs 215 conclusively on a closing day basis, then DLF could go down to Rs 180.
On the other hand, a sharp break above Rs 265 has the potential to lift the stock towards Rs 317 initially and then to Rs 388-390 level.
F&O pointers: The counter has been witnessing a steady accumulation in open interests, on the long side. However, option trading indicates a negative bias as 230 put witnessed unwinding of long position.
On other hand, 240- and 230-strike calls saw an accumulation of open position, though the latter saw only a moderate addition.
This indicates a neutral to negative bias.
Strategy: Traders could consider short strangle using DLF 240 call and 220 put.
The maximum profit for this strategy is the total premium collected i.e. Rs 7.2 per contract – the call closed at Rs 3.85 and the put at Rs 3.4.
This strategy is best suited when one considers the fact that the stock is likely to move in a narrow range.
However, the loss could be unlimited should the stock break the range violently in any one of the directions. Besides, shorting options involve margin commitments.
Market lot for DLF is 1,000 shares. Traders could consider holding this strategy till expiry.
The maximum profit occurs if the stock ends within the range at the time of expiry.
Tata Chemicals: The long-term outlook appears positive for Tata Chemicals, as long as it stays above Rs 322. However, in the immediate term the stock could face some resistance and is likely to move in a range of Rs 410 and Rs 350.
F&O pointers: The Tata Chemicals futures shed open interest on Friday. It also rules with a sharp discount of Rs 10, as the company announced a dividend. Options did not see trading activity.
Strategy: Traders could consider going short on Tata Chem futures with a stop loss at Rs 395 for an initial target of Rs 350.
Follow-up: Last week we advised traders to consider long on Tata Motors DVR and a short on JP Power Ventures.
Traders could continue to hold on to these positions, with respective stop-losses mentioned
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