Short strangle on TVS Motor :: Business Line

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The long-term outlook remains positive for TVS Motor Company. The stock finds immediate support at ₹243.

If it sustains its current bullish trend, it can target ₹298 initially and ₹340 thereafter. However, we expect the stock to see some moderation before rallying further.

F&O pointers: The counter added 2.84 lakh shares on Friday accompanied by sharp rally in price. Option trading, however, indicates limited upside as open interest in ₹270 and ₹280 calls surged.

Strategy: We advise traders to consider short strangle on TVS Motor, which can be constructed by selling ₹290 call and ₹220 put. These options closed with a premium of ₹5.60 and ₹1.30 respectively.

This strategy will entail an inflow of ₹6,900 (as market lot is 1,000 units a contract) and this will be the maximum profit one can earn.

For that to happen, TVS Motor has to rule between ₹290 and ₹220. However, the loss will be unlimited if TVS Motor moves sharply in one direction, either up or down. A close above ₹298 or below ₹212 will start pinching the position.

This strategy is for traders who can withstand wild swings. They can exit the position if the loss mounts to ₹5,500.