JK Jain of Karvy Stock Broking told CNBC-TV18, "Post the news flow in DLF we have seen aggressive short positions build up in the stock. However in the past couple of trading sessions the stock has bounced back but we haven’t seen any short covering taking place. We see the pressure to continue in this stock and we see it retesting the lows that it made last week."
"On that basis we are giving a put ratio. Even if you look at the Option the volatilities are still high. On that basis we are suggesting a Put ratio where one can buy the 120 Put Option which is trading around Rs 4.5 while simultaneously sell two lots of 110 Put Option which is trading close to Rs 2. The net outflow or the maximum loss in this strategy would be Rs 0.50 per share. However the maximum gain would be Rs 9.5 if the stock expires close to Rs 110," he said.
"The lower break even would be Rs 100.05. So we see a comfortable strategy where the risk reward is extremely strong, 1:19. If the stock expires at Rs 110 one could have a maximum gain of Rs 9.5 per share. So, on that basis we are recommending a Put ratio in DLF between the strikes of Rs 120 and Rs 110."
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