HDFC Securities Drops CONCOR Options Bomb: Massive Profit Potential Unlocked! See Strategy Now!

HDFC Securities, through its senior technical and derivative analyst Nandish Shah, has put forth a precise options trading strategy for investors interested in Container Corporation of India (CONCOR). This strategy aims to capitalize on anticipated price movements based on technical analysis and market sentiment.

Strategy Details

• The recommended trade is a Bull Call Spread strategy.
• It involves buying the CONCOR December 30 expiry 520 Call option.
• Simultaneously, it requires selling the CONCOR December 30 expiry 530 Call option.
• The net cost to implement this strategy is ₹3.3 per share, translating to ₹4,125 per trading lot (since each lot contains 1,250 shares).

Rationale Behind the Call

• The recommendation is supported by observations of short-covering in CONCOR Futures. This is indicated by a fall in Open Interest (OI) alongside a 1% price rise, suggesting existing short positions are being closed out, potentially leading to upward momentum.
• CONCOR's short-term trend has turned positive, evidenced by the stock price crossing its 5-day Exponential Moving Average (EMA), a key technical indicator for short-term trend following.
• In the options market, significant put writing has been observed at the ₹520 strike price, indicating strong support and bullish sentiment at this level.
• Momentum indicators and oscillators are currently showing strength, reinforcing the positive outlook for the stock's current recovery phase.

Key Financials of the Strategy

• Strike Prices: Buy 520 Call, Sell 530 Call
• Expiry Date: December 30
• Cost per Strategy: ₹4,125 (₹3.3 per share)
• Maximum Profit: ₹8,375, achievable if CONCOR closes at or above ₹530 on expiry.
• Breakeven Point: ₹524
• Risk Reward Ratio: 1:2.03
• Approximate Margin Required: ₹5,600

Importance for Traders

• This strategy is suitable for traders who expect CONCOR to rise moderately but not beyond ₹530 by the expiry date.
• It offers a defined risk (the premium paid) and a potentially higher reward.
• The strategy leverages positive technical signals and market sentiment shifts.

Impact

• This specific options strategy recommendation directly impacts traders who choose to implement it, influencing their potential profit or loss on CONCOR.
• For the broader market, such targeted recommendations from reputable brokerages can influence investor sentiment and trading activity in specific stocks and their derivatives.
• Impact Rating: 6/10

Difficult Terms Explained

• Options: Financial contracts giving the buyer the right, but not the obligation, to buy or sell an underlying asset at a specific price on or before a certain date.
• Call Option: An option contract giving the buyer the right, but not the obligation, to purchase an asset at a specified price (strike price) on or before its expiration date.
• Put Writing: Selling a put option, obligating the seller to buy the underlying asset if the buyer exercises the option. It's typically done when the seller expects the price to stay above the strike price.
• Expiry: The date on which an options contract ceases to exist.
• Lot Size: The standard quantity of shares for a particular security or futures contract that must be traded.
• Breakeven Point: The price at which a trader will neither make a profit nor incur a loss on a particular trade.
• Risk Reward Ratio: A metric that compares the potential profit of a trade to its potential loss. A ratio of 1:2 means for every $1 risked, a trader aims to make $2.
• Short Covering: The act of buying an asset that was previously sold short, in order to close out the position.
• OI (Open Interest): The total number of outstanding derivative contracts (options or futures) that have not been settled.
• EMA (Exponential Moving Average): A type of moving average that places a greater weight and significance on the most recent data points.
• Momentum Indicators: Technical analysis tools used to measure the speed and change of a stock's price movements.
• Oscillators: Technical indicators that move within a defined range, often used to identify overbought or oversold conditions.