Price at resistance and a Negative Divergence is seen. Now stock may run either of the sides. If breaks out off the resistance then new highs may be witnessed or if breaks down due to Negative Divergence, then 1300 may come by. There is a Tweezer Top pattern formed which is posing as a strong resistance for bulls.
a) Sell Dec Future at 1433 and hedge the short trade by buying 1440 Dec. Call at 36.00 (Theta at 0.44). Keep the 1st target below 1400 which is the immediate support zone as per OI Table. If 1400 is broken, 1300 (200 DMA, this level is also the OI support) may come during the Dec. series. Hedge of Call will reduce to nil. Net profit on short Fut. will be approximately 100 points. Lot size 375. Approximately 36000.00+ may be the net profit (Since Fut. price and cash price are not different, i.e. there is no premium on Fut.).
b) Long Straddle: Buy 1440 Dec. Call at 30.00 and Dec. Put at 36.00 (approximate investment will entail 22000/-). If price runs either of the sides, either Call or Put will be In-The-Money and that will make profit since its Theta will be quite low and its value will increase. Out-of-Money will lose value due to increasing Theta.
If price does consolidate for 4-5 days, there will be a small loss, and then close the trade. Historically (as per long term chart study) LT is a volatile stock. So price may not consolidate for a long time.
a) Sell Dec Future at 1433 and hedge the short trade by buying 1440 Dec. Call at 36.00 (Theta at 0.44). Keep the 1st target below 1400 which is the immediate support zone as per OI Table. If 1400 is broken, 1300 (200 DMA, this level is also the OI support) may come during the Dec. series. Hedge of Call will reduce to nil. Net profit on short Fut. will be approximately 100 points. Lot size 375. Approximately 36000.00+ may be the net profit (Since Fut. price and cash price are not different, i.e. there is no premium on Fut.).
b) Long Straddle: Buy 1440 Dec. Call at 30.00 and Dec. Put at 36.00 (approximate investment will entail 22000/-). If price runs either of the sides, either Call or Put will be In-The-Money and that will make profit since its Theta will be quite low and its value will increase. Out-of-Money will lose value due to increasing Theta.
If price does consolidate for 4-5 days, there will be a small loss, and then close the trade. Historically (as per long term chart study) LT is a volatile stock. So price may not consolidate for a long time.
a) Future Dec. sold at 1433. Price today closed at 1402.
b) Sort trade hedged by buying 1440 CE at 36.00, today 1440 CE is at 17.00.
Net gain of 11 points (375x11=4125).