F&O Strategy: Buy ITC Put Option
The short-term outlook for the stock of ITC, currently priced at ₹489.10, appears to be flat to negative, although its long-term prospects continue to look promising. The positive outlook on the stock would only be reconsidered if it were to close below ₹383. However, in the near term, there seems to be potential for a decline in its price. The immediate support levels are identified at ₹466 and ₹440, with a breach below the latter expected to precipitate a sharp decline.
In the realm of Futures & Options, the August futures for ITC concluded at ₹491, slightly above the spot price of ₹489.10. During this period, open interest has shown consistent growth. The observed premium alongside the accumulation of open interests hints at the formation of long positions. Nevertheless, there’s skepticism around the sustainability of this rally.
Proposed Strategy
We suggest traders consider purchasing the 490-put option for ITC. The closing premium for this option stood at ₹10.05. Given the market lot size of 1,600 shares, the total cost for adopting this strategy would amount to ₹16,080, which also represents the maximal potential loss. This scenario of maximum loss would play out if ITC’s price does not fall below ₹490 at the time of expiry.
Conversely, a notable downturn in ITC’s price could lead to significant profits. The breakeven point for this trade is positioned at ₹480—prices falling below this level would result in profitable outcomes. We recommend traders to exit their position once a profit of ₹8,500 has been achieved or to cut their losses at ₹5,500. This position should be held for a duration of two weeks, after which it could be reassessed.
Previous Strategy Follow-Up
In an earlier strategy involving Ashok Leyland, the market moved in line with expectations, potentially providing profitable opportunities for some traders. For those still holding positions in Ashok Leyland, the advice would be to exit now to capture any gains.
Note: The recommendations provided here are rooted in technical analysis and the observation of F&O positions. It’s important to acknowledge that trading in such financial instruments carries inherent risks of loss.
