Two Options to play Infosys ahead of its Sept results

Mumbai: Traders looking to bet on Infosys ahead of its September quarter results on Thursday could create a strategy using a combination of stock options. Analysts said this strategy is designed to bet on a drop in the premium of Infosys options after its results. The expectation is that would trade in a ₹1,400-range. On Tuesday, traders created fresh bearish bets with the stock price declining 2.7% to ₹1,423.80. Open interest or outstanding positions went up by 12%, indicating a short build-up.

Analysts are expecting Infosys to announce a share buyback of ₹8,000 crore to ₹10,000 crore. The buyback is expected to limit the downside in the near term, as the buyback price is likely to be at a significant premium to the current market price, according to analysts.

ET takes a look at two strategies suggested by derivatives analysts.

Iron Butterfly

Rajesh Palviya, head of technical and derivatives at Axis Securities, said this strategy involves selling one lot of ₹1,400 Infosys Call of October expiry at ₹48 and selling one lot of ₹1,400 Put at ₹43.

Simultaneously, traders must buy one lot of 1,500 Call at 16 and buy one lot of 1,300 Put at 11.

The risk-reward in this strategy is limited, and the gains will be accrued between the two levels — 1,470 on the upside and 1,330 on the downside.

The maximum profit is estimated at 19,200 if Infosys closes or expires at 1,400. On the other hand, if the stock’s expiry closes above 1,464 or below 1,336, the strategy will start making a loss. A close above 1,500 or below 1,300 would result in losses of 10,800.

Bear Put Spread


Chandan

, analyst at , is moderately bearish on the stock and has recommended a Bear Put Spread for October expiry.

In this strategy, traders must buy one lot of 1,420 Put strike at 54 and simultaneously sell one lot of 1,340 Put strike at 20. The net outflow or maximum loss will be restricted to up to 10,200. If Infosys closes below 1,386 on expiry, the strategy will start making a profit. The maximum gains will be restricted to 13,800 because the gains of the long 1,420 strike put will be offset by the sold 1,340 strike put if Infosys closes below 1,340 on expiry.

“The stock has failed to hold above 50 double exponential moving average and formed a bearish engulfing pattern on a daily scale. It’s better to hedge position and protect the downside towards 1,350 zones,” said Taparia.

The maximum profit is estimated at 19,200 if Infosys closes or expires at 1,400



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