Shares of Adani Ports and SEZ (₹767.55) remain at significant levels. The stock found immediate support at ₹705 and resistance at ₹811. It looks like the current rally in the stock may be here to stay.
F&O Indicators: Adani Ports and SEZ reduced open positions in the last few days along with rising stock prices. This indicates that traders prefer to exit positions to book profits. Options trading suggests that the stock could move in the ₹700-800 range.
Strategy: Traders can consider buying a 770-strike call option on the stock which closed at a premium of ₹16.05. Since the market lot is 1250 shares, this will cost the trader ₹20,062.50, which is the maximum loss one can incur. Maximum loss will occur if Adani Ports and SEZ stays at ₹770 or falls below this level on expiry.
On the other hand, the profit potential is high if the stock jumps sharply. The position will turn positive on movement above ₹786.05 i.e., this is the break-even price. As the May contract is expected to expire this week, stocks will be volatile.
The trader can exit the position if the loss increases to ₹11,500. As Adani is one of the high beta stocks, we advise traders to use stop loss efficiently to reduce losses and protect profits as well. If stocks open sharply higher on Monday, traders can ignore this strategy.
Follow up: A long streak on Tata steel provided a profit opportunity last week.
Note: Recommendation is based on technical analysis and F&O position. There is a risk of loss in trading.