Future Perfect. Take a call on SBI

The long-term outlook remains positive for the stock of State Bank of India (₹325) as long its rules above ₹250. The stock finds an immediate support at ₹305 and a close below that level will weaken it to ₹275. On the other hand, if the stock sustains the current bullish trend, it can reach ₹410. However, we expect SBI to display a volatile trading pattern before taking a clear trend.

F&O pointers: SBI November futures has been accumulating long positions quite consistently. From 2.185 crore shares, open interest have shot up to 6.72 crore shares, signalling build up of long positions, ever since the Government recapitalisation package. Options trading indicates that the stock will hover in the band between ₹300 and ₹330.

Strategy: Traders can consider buying ₹340-strike call on SBI, which is scheduled to announce its results on November 10. The stock can swing wildly on either side based on its financial performance. The ₹340-call closed with a premium of ₹10, which means the maximum loss in this strategy would be the premium paid — ₹30,000 (as the market lot is 3,000 shares). This will happen if SBI closes at or below ₹340.

A profit of potentials are huge, if the stock travels vigorously towards the north. A close above ₹350 will start yielding positive returns. Hold the position till expiry or the loss mount hits ₹12,000.

Follow-up: Book profits in Lupin.