The outlook for the stock of Aurobindo Pharma (₹745.6) has turned positive. The stock finds immediate support at ₹712.65 and the major one at ₹590. A close below the latter will change outlook negative.
On the other hand, the stock finds an immediate resistance at ₹772 and a major one at ₹905. A close above the latter will trigger a fresh rally in the stock. Aurobindo Pharma is expected move positively in the short term.
F&O pointers: Aurobindo July futures closed at ₹750.25 against the spot price of ₹745.60. The higher premium indicates that traders preferred to rollover the long positions of Aurobindo Pharma futures, expecting upside. Option trading indicates that the stock could move in the ₹700-800 range.
Strategy: Consider a bull-call spread on Aurobindo Pharma. This can be initiated by selling 750-strike call and simultaneously buying the 725-strike call. As these options closed with a premium of ₹22.75 and ₹30.50 respectively, this strategy will cost traders ₹8,525. (₹7.75/lot and market lot is 1,100 shares). This will be the maximum loss one can suffer in this strategy and the maximum loss will happen if Aurobindo Pharma settles at or below ₹725.
On the other hand, a profit of ₹18.75/lot or ₹18,975 is possible if Aurobindo Pharma manages to end at or above ₹750. We advise traders to hold the position till last week of expiry.
Follow-up: We advised Mphasis 1950-strike call last week. Due to ex-dividend last week, the strike-price would have changed to 1900 Traders can continue to hold the 1900-strike call of Mphasis for another two weeks.
Note: The recommendations are based on technical analysis and F&O positions. There is a risk of loss in trading