The stock of GAIL (India) (₹111.50) is ruling at a crucial level. A close above ₹113 can trigger a fresh rally. Immediate supports are at ₹103 and ₹95. A close below the latter will alter the current bullish view on the stock.
On the other hand, sustenance of current strength can lift the stock towards ₹124 initially and chart a new peak later.
F&O pointers: GAIL (India) futures saw a rollover of 28 per cent to next month series, which is quite healthy. The August futures closed at ₹112.45 and July futures at ₹111.60 against the spot price of ₹111.50. The premium August futures indicate the existence of long positions. Option trading indicates that the stock can move between ₹115 and ₹105.
Strategy: Consider a calendar bull call spread strategy on GAIL (India) using different strikes. This can be initiated by selling the current month 108-strike call and simultaneously buying the August 111-strike call. These options closed with a premium of ₹3.70 and ₹4.40, making a net outgo of ₹0.7/contract. As the market lot is 9,150 shares per lot, the net cost would be ₹6,405. This is the maximum loss which will happen if the stock closes at or below ₹108 in August expiry.
However, profit potentials are high, if GAIL (India) dips to ₹108 in the current expiry and then rises sharply.
We advise traders to hold the position for at least two weeks. Initial stop-loss can be placed for ₹3,800. Exit if the price of the 108-call falls below ₹1.25.
Follow-up: Hold TCS for one more week and can be reviewed later. Book profits in Aurobindo Pharma call options recommended in the previous week.
Note: The recommendations are based on technical analysis and F&O positions. There is a risk of loss in trading