Future perfect | Buy 290-call on LIC Housing Finance

The long-term outlook for LIC Housing Finance appears negative though in the short- and medium-term the stock may move in a narrow range with a positive bias. The stock finds an immediate resistance at ₹298 and support at ₹259.

On the conclusive close above ₹298, LIC Housing Finance can go up to ₹320. But a close below the immediate support could trigger a sharp fall. 

F&O pointers: The LIC Housing Finance saw a rollover of just 10 per cent. While the current month series rules in a premium, the next month contract is quoting on par with respect to the spot close. This signals that traders are still cautious. Option trading indicates a movement in the range of ₹260-300.

Strategy: Traders could consider buying 290-call option of LIC Housing Finance. The option closed with a premium of ₹9.50. As the market lot is 1,300 shares, one has to shell out ₹12,350 to buy the option.

The premium paid initially (₹12,350) would be the maximum loss one can suffer from this position. That will happen if LIC Housing Finance manages to stay at or below ₹290.

On the other hand, a close above  ₹299.50 will start turning the position positive. We expect the stock to remain firm in the short term. Traders could exit from the position if the loss mounts to ₹6,500 or at a profit of ₹10,000. 

Follow-up: Traders could start booking profits on Bajaj Finance.

(Note: The recommendations are based on technical analysis and F&O positions. There is a risk of loss in trading.)