Amit Trivedi, director, Fin Stream Financial Advisors, talking to CNBC-TV 18 says that he does not expect the market to dip substantially lower. This is taking into account the global cues are good, with the Dow Jones index hitting a record high and volatilities in Asian markets dipping.
He says upsides seemed to be capped for the market; 5650 on the lower side, and around 5950-6000 on the upper side should be the broad range that we can expect for the March series.
Here is an edited transcript of the interview
Q: The global context is a bit stronger this morning. How are you approaching the index and are you taking any call for the series yet? How would you want to trade it?
A: As you rightly said, yesterday the Dow Jones index hit a record high, and at the same time a lot of emerging markets are pulling back. Also what is interesting is that you have volatilities across Asia coming down. So if you map that, what it suggests is upsides seemed to be capped for our markets, but at the same time, markets should not dip substantially lower from here.
So we think around 5650 on the lower side, and around 5950-6000 on the upper side should be the broad range that we can expect for the March series.
Q: Do you have a strategy on DLF, a stock that has been quite active?
A: Yes. Interestingly, what is happening is given that Nifty volumes are at around 12 percent, you have individual stock Option volumes at a much higher substantial level. DLF is at around 45 percent, so we have a strategy there. You have a board meeting today to discuss the sell proceeds part of it. DLF has moved in the band between Rs 250 at the lower end and Rs 280 on the higher side.
So, we think traders and investors can buy Rs 280 strike calls at around Rs 4.8 and sell Rs 290 strike calls at Rs 3. There is an initial cash inflow of Rs 1.20 in this trade, which translates to Rs 1,200. You will start taking losses if DLF moves beyond Rs 300, which is approximately 18 percent from current prices of Rs 255-260. Your maximum profit will be if DLF goes to around Rs 290, which is Rs 10. Even if DLF remains here you make at least Rs 1.20 in this particular strategy.
Q: Reliance Industries was a pretty strong stock yesterday. Do you have a strategy on that one?
A: What we are seeing is Reliance has corrected from around Rs 900 levels post the results to around Rs 810-815 levels. Yesterday there was a slight move up to around Rs 825-827 levels. We feel the stock should consolidate at these levels, or move up marginally to around Rs 840-845 levels.
Traders can go and sell 760 strike put option of Reliance at Rs 2, so you make around Rs 500. You make Rs 500 if Reliance closes at any value above Rs 760 which translates to around 1.5 percent on the margin deployed.
Q: What kind of a strategy would you advocate in the Futures and Options space? We are seeing quite a bit of call writing in the 6000 and 6100 strikes. Do you think that could be a resistance for the market, the 6100 level?
A: What we are seeing is 5650 on the lower side, and around 6000 on the higher side seems to be an interesting range for the market for the March series. So one can go and sell strangles for the March month, which is, you can sell 5500 strike puts and 6000 strike calls.
There is an initial cash inflow of around Rs 15 in this particular strategy. So you make Rs 15 if markets remain broadly in this range of around 5500 and 6000.