The short- and long-term outlook remains positive for the stock of Aurobindo Pharma (₹1,502.75). Nearest support levels are at ₹1,440 and ₹1,248. A close below the latter will alter the long-term view on the stock. However, if the current trend sustains, it can reach ₹1,600.
F&O Pointer: Aurobindo Pharma witnessed a steady accumulation of open positions in the recent weeks. But in the last two days, the counter shed open positions, when the share price rose sharply. Option trading indicates that the stock could move in the ₹1,300-1,600 range.
Strategy: We advise traders to consider calendar bull call spread on Aurobindo Pharma. This can be initiated by selling the current month 1,500-strike call and simultaneously buying the same strike call of the next month.
As these options closed with a premium of ₹27.15 and ₹59.75 respectively, the net cost will be ₹32.6/lot or ₹17,930 (market lot is 550 shares). The maximum loss would be the net premium paid and that will happen if Aurobindo Pharma falls from current level.
On the other hand, profit potential is substantial if Aurobindo Pharma holds on to current level till August expiry and rises sharply next month. Hold the position for at least two weeks. Exit the trade if the loss mounts to ₹8,500.
Follow-up: Stop-loss would have triggered on Asian Paints (put option strategy), as the stock moved up.
Note: The recommendations are based on technical analysis and F&O positions. There is a risk of loss in trading