The stock of Reliance Industries Ltd (₹2,322.7) is ruling at a crucial level. Another conclusive close below ₹2,325 will weaken the stock towards ₹2,230 and then probably to ₹2,025.
A close below the latter will change the short-term outlook negative. On the other hand, the immediate resistance is at ₹2,442 and a close above that will lift the stock towards ₹2,598.
We expect the stock to bounce back from crucial support in the short term though the overall trend appears to be in the narrow range of ₹2,200-2,750.
F&O pointers: Reliance March futures closed at a reasonable premium at ₹2,333.80 against the spot price of ₹2,322.70. Last week, Reliance March futures shed open positions in the first three days when the stock gained but added open positions on Thursday and Friday when RIL stock fell.
These signal that traders preferred to book profits when price rises and add short positions. Option trading indicates a range of ₹2,200-2500.
Strategy: Consider calendar bull call spread on RIL. This can be initiated by selling 2300-strike of call option of current month and simultaneously buying the same strike of the April series.
These options closed with a premium of ₹65 and ₹101.05 respectively. That means this strategy will cost traders ₹9,012.50, as the market lot is 250 shares. Maximum loss would be the net premium paid (₹9,012.50).
On the other hand, profit potentials are high, if the stock falls or stays below ₹2,300 in the current expiry and rises sharply from the first week of April.
Hold the position till the first week of April. Before that, book profits if the combined option premium rises to ₹100/lot.
Follow-up: Stop-loss would have triggered on DLF call options, as the stock tumbled sharply.
Note: The recommendations are based on technical analysis and F&O positions. There is a risk of loss in trading