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The shares of Hindustan Unilever (₹1,007) are in a bull grip. If the current trend sustains, HUL will reach ₹1,225. Only a close below ₹933 will turn the short-term outlook negative. Immediate support is at ₹975, the long-term support is at ₹840.
F&O pointers: The HUL May futures added fresh long positions on Friday. However, the counter witnessed a rollover of just 3 per cent June series. Option trading indicates that the stock may face resistance at ₹1,020 while ₹990 may act as a support.
Strategy: Traders can consider a bull calendar spread on HUL by selling the current month ₹1,000-call option and simultaneously buying the same strike of June month. These options have closed with a premium of ₹15.25 and ₹26.80 respectively and so the total outgo will be ₹11.55 per contract. As the market lot is 600 shares, in absolute term, traders have to fork out ₹6,930.
The net premium paid would the maximum loss one can suffer in this strategy and that would happen if HUL closes at or below ₹1,000 at the time of June contract expiry.
The profit potential is unlimited, if HUL surges sharply, particularly in June series.
Follow-up: Hold YES Bank put option.
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