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Friday
May, 24

Options Strategy: F&O Counter Turning Up Amid Correction!

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As the index made a new high on Thursday, currently gaining 0.69% to 19,594, by 11:07 AM IST, investors’ risk appetite seems to be coming back. One blue-chip company that’s gaining traction is SBI Cards and Payment Services Ltd (NS:). It is one of the prominent players in the Indian credit card market, having a market capitalization of INR 79,290 crores, making it the 74th largest listed company on the NSE.

Mutual funds are consistently picking up stakes in this counter, as their interest has gone up from 8.02% in March 2022 to 12.16% in March 2023. One of the reasons for this could be the record high FY23 revenue and net income of the company, at INR 14,285.67 crores and INR 2,258.47 crores, respectively.

Image Description: Daily chart of SBICARD with volume bars at the bottom

Image Source: Investing.com

The stock had been facing some selling pressure since it marked a top of INR 933 on 14 June 2023. From the last few sessions, the liquidation was abating as the trend gradually shifted sideways which was an early signal for bulls starting to overpower bears. Today, as the mood of the broader markets is good, the stock jumped 1.83% to INR 853.6 and surged past its falling trendline resistance.

The volume on this breakout is not very high which might be considered a not-so-good signal for bulls. However, as I always say, it’s generally difficult to get a sharp volume spike in a large-cap counter because the average volume itself is very high.

Nonetheless, the stock seems to be breaking above its trendline and base, which is a bullish signal and a small sideways movement prior to the rally has strengthened the confidence. Traders looking to take a bullish bet on this counter can do so via a bill call spread.

The ATM 850 CE is currently quoting at INR 23 while the OTM 870 CE is trading at INR 14.5. Going long ATM and short OTM will require a net premium of INR 8.5 which will become the max risk on this trade setup. On the upside, if SBICARD closes above INR 870 by the current monthly expiry, traders would be able to fetch a decent INR 11.5 which will be the maximum gain.

Read More: What is ‘Dabba Trading’ & Why You Should Avoid it!



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