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The long-term outlook remains positive for the stock of Federal Bank (₹133.2) as long as it stays above ₹103. However, in the short term the stock may move in a range between ₹120 and ₹140. Only a breach of this zone will give the stock a clear direction.
We expect the stock to move in a range for some time. A break above the upper band will trigger a fresh rally in the stock that can lift it towards ₹150-165 levels.
F&O pointers: Federal Bank August futures closed at ₹134 against the spot price of ₹133.20. This signals the marginal existence of long positions. Option trading indicates the Federal Bank can move in the ₹125-150 range.
Strategy: Consider a short-strangle strategy on Federal Bank. This strategy is strictly for traders who can understand the risks involved as it gives only a limited profit but theoretically unlimited losses.
The strategy can be constructed by simultaneously selling Federal Bank 150-call and 125-put options which closed with a premium of ₹0.45 and ₹0.50 respectively. As the market lot is 5,000 shares, this will yield an inflow of ₹0.95/contract — ₹4,750. This will be the maximum profit one can earn which can be realised if Federal Bank stays between ₹125 and ₹150 on expiry.
On the other hand, loss can multiply if the stock falls below ₹124.05 or rises above ₹150.95. Hold the position for a week and can be reviewed later.
Follow-up: As advised last week, hold ICICI Bank 980-call option, despite the strategy is currently in the negative zone.
Note: The recommendations are based on technical analysis and F&O positions. There is a risk of loss in trading
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