Consider calendar bull call spread on Tata Motors
Though the long-term outlook remains negative for Tata Motors (₹151.3), in the short term, it may remain firm.
The stock finds immediate support at ₹129 and a close below that could trigger another bout of selling and that could drag the stock lower to ₹104.
An immediate resistance appears at ₹165 and a major one at ₹182. A close above the latter will change the medium-term outlook to positive.
F&O pointers: Despite the stock trading volatile on Friday, Tata Motors February futures added over 5 per cent in open interests, which indicates strong buying at lower levels.
Option trading indicates a range of ₹140-₹180 for Tata Motors.
Strategy: Consider a calendar bull call spread on Tata Motors.
This can be initiated by selling the current month ₹150-call and simultaneously buying the same strike call of March month series.
They closed with a premium of ₹8.75 and ₹11.35 respectively.
This would entail an initial outflow of ₹ 2.6 a contract that works out to
₹5,200, as the market lot is 2,000 shares per contract.
Hold the positions till expiry of March contracts as the loss could be the premium paid.
Risk-averse investors can book profits as per their profile.
KS BADRI NARAYANAN