The Hindu Business Line : ACC, L&T may turn positive

FRIDAYs trading in the derivatives segment saw most equity puts gain value in line with the bearish sentiment in the spot market. Here are some buy/sell strategies based on the day's trading:

Equity options: The January 170 calls on ACC clocked the highest volumes on that stock with 250 contracts.

The outlook on the stock may turn positive. Dealers who want to bet on the positive movement can consider buying the January 170 calls, which cost 8.55 points at the day's close. Nearly 75 per cent of the option premium consists of time value, and works against the buyer. The time decay is, however, slow. The probability of the calls ending ITM is 0.57.

Dealers can also consider buying the January 180 calls on ACC. These calls cost 5.4 points at the day's close, and are currently OTM by 8 points. The probability of the calls ending ITM is 0.39.

The January 200 calls on L&T clocked the highest volumes on the stock with 203 contracts. The outlook on the stock may turn positive. Dealers who want to bet on the upside can consider buying the January 200 calls, which cost 10.25 points at the day's close. Nearly 85 per cent of the option premium consists of time value, and works against the buyer. The probability of the calls ending ITM is 0.56.

Dealers can also consider buying the OTM January 210 calls, which cost 6 points at the day's close. The entire premium consists of time value, but the time decay is slow.

Index options: The January 1100 calls on Nifty continue to top the volumes in the index option segment, with 142 contracts. The market seems to be precariously poised. Dealers can, hence, refrain from taking fresh positions in index options.

Follow-up: Dealers who are long on the January 570 calls and 600 calls on Digital GlobalSoft can hold their positions, as the outlook on the stock continues to remain positive.

Notwithstanding the fall in value during the day, dealers who are long on January 4000 calls and 4100 calls on Infosys can continue to hold the position with a stop-loss limit.

The positive outlook on Tata Engg appears to be weakening. Dealers who are long on January 120 and 130 calls on the stock can consider reversing their positions.

The positive outlook on Satyam appears to be weakening. Dealers may nevertheless continue to hold their long calls in the 260 and 260 strikes. The highly volatile characteristic of the stock may well push the long calls again into the positive territory.

Dealers can consider reversing the bull spread on Nifty constructed by buying the January 1080 calls and writing the 1100 calls.

Finally, those who are long the January 300 and 320 puts on Reliance Industries can consider holding their positions, as the outlook on the stock remains negative.

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