Buy DLF 200 Put; sell 180 Put: JK Jain

JK Jain of Karvy Stock Broking told CNBC-TV18, “If you look at DLF post the institutional placement the stock has seen huge selloff. The stock has been hammered down from the highs of Rs 245-250 levels to the lows of Rs 190 in a span of two weeks. If you look at in the last couple of days the stock has seen a trading bounce. The stock is headed towards Rs 200 levels in two days trade.”

He further added, “If you look at even in today's trade we have seen a fresh bout of short positions was build up in the stock. So we expect the selling pressure to continue in the stock and the stock to head towards its 52-week low of Rs 170-175 levels for the series. On that basis we are giving a Bear Put. One can buy 200 Put which is trading close to around Rs 11 and simultaneously sell 180 Put which is trading close to around Rs 4. The strategy would have a cost of Rs 7 which would be the maximum loss if the stock expires above Rs 200. However, we are expecting the stock to slip below Rs 180 as the expiry approach-wise. So one can make a maximum gain of Rs 13, a strategy giving 1:2 risk reward ratio, so one can initiate a Bear Put strategy in DLF with 200 and 180 strike.”