Bear Put ratio: Buy L&T 1550 Put, Sell 1500 Put, says Jain

Jain told CNBC-TV18, “Two-thirds of the Nifty stocks are looking weak. Particularly if you look at the capital goods space after the IIP data we have seen gradual unwinding of long positions and fresh short positions were build up. We are advising a bear put in L&T wherein one can buy 1550 put which is trading around close to Rs 20 and simultaneously sell 1500 put which is trading around Rs 7. The next cost of this strategy would be around Rs 13 and the maximum profit would be around Rs 37 if the L&T goes below Rs 1,500. We are expecting L&T will be moving along with the market and it should gradually move down below Rs 1,500 towards the expiry. So we are initiating a bear put. This strategy is giving a cost of Rs 13 with maximum profit of Rs 37 which is more than 1:2 risk-reward ratio. So we are advising a bear put ratio in L&T.”

Disclosure: No personal holding in stocks discussed, but may have recommended to clients.