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The stock of LIC Housing Finance (₹372.25) remains at a crucial level. It finds an immediate resistance at ₹395 and a close above this will trigger a fresh rally that can lift the stock to ₹460. The stock finds an immediate support at ₹357 and the next one at ₹335. A close below latter will change the outlook to negative. However, we expect the stock to retain the bullish bias and may move in a broader range between ₹325 and ₹450 in the near term.
F&O pointers: LIC Housing Finance contracts saw a strong rollover of 95 per cent to April series. Besides, the April futures, at ₹374.50, also commands a decent premium over the spot price of ₹372.25. This indicates a positive bias, as traders are willing to pay premium to carry over their long positions. Option trading indicates that LIC Housing Finance may move between ₹350 and ₹400.
Strategy: Traders could consider a bull-call spread on LIC Housing Finance which can be initiated by selling 400-strike call and simultaneously buying the 375-strike call. These options closed with a premium of ₹6.05 and ₹15.05 respectively. As the market lot is 2,000 shares per contract, this strategy would cost investors ₹18,000 (or ₹9/contract), which will be the maximum loss one can suffer. For that to happen, LIC Housing Finance has to close at or below ₹375 on expiry.
On the other hand, a profit of ₹32,000 is possible, if LIC Housing Finance sustains the recent rally and closes at above ₹400. Traders can exit the position at a profit of ₹20,000 or at a loss of ₹12,000, whichever happens first.
On the other hand, traders with high-risk appetite can consider going long on LIC Housing Finance futures by keeping initial stop-loss at ₹358. If the stock opens on positive note and moves above ₹383, stop-loss can be shifted to ₹372.50. Investors can aim for an initial target of ₹395, and even ₹450, however, with trailing stop-loss.
Follow-up: Continue to hold April expiry Concor 700-strike Call.
Note: The recommendations are based on technical analysis and F&O positions. There is a risk of loss in trading.
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