Financial Daily from THE HINDU group of publications
Thursday, Feb 10, 2005
Financial Daily from THE HINDU group of publications Thursday, Feb 10, 2005 |
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Markets
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Derivatives Markets Columns - On the hedge Short-term price swing likely in Maruti, HDFC Bank B. Venkatesh
THE following strategies are based on Wednesday's trading in the spot and the derivatives segment on the NSE. The strategy is structured to take advantage of short-term price swings. Because such price swings can run contrary to the primary trend, it is advisable to trade the positions with protective stops. The following recommendations are valid for only three trading sessions from the date of initiation. If the profits are not taken or the position is not stopped, the contracts have to be closed at the horizon. Maruti Udyog: Sell February futures after the stock trades below Rs 487.90 in the spot market. The downside price target is Rs 467. Initiate the position with spot-market-stop-loss at Rs 497. The position has to be traded with trailing stops to control the upside risk. The margin on the futures position is approximately 16 per cent of the contract value. The minimum order size is 400 units. Traders can alternatively construct bear put spread. This position can be initiated with one long February 480 puts and one short February 460 puts. The spread can be set up for a net debit of 4 points. The position would payoff 11 points if the stock reaches the downside price target within 3 trading sessions. HDFC Bank: Sell February futures after the stock trades below Rs 588 in the spot market. The downside price target is Rs 568. Initiate the position with spot-market-stop-loss at Rs 593. The position has to be traded with trailing stops to control the upside risk. The margin on the futures position is approximately 16 per cent of the contract value. The minimum order size is 800 units. No alternative strategies are available, as options on the stock are not actively traded. (The opinion expressed in this column is based on technical analysis. There is risk of loss in trading.)
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