DLF and Ranbaxy

This month was good for call writers and they must have made very descent profit without much tension. Normally during middle of the month sometimes CALL premium is at least 40% more than buying price and it creates doubt in minds of CALL writers about continuing with the trade. However, this month was an exception.Not many CALL premiums have gone up.

For last week, better to sit aside and see what market does. Everybody is expecting downtrend; but market normally does behave differently that the masses. Let us not predict, that is not an objective of this blog and continue with out low risk strategies.

DLF:
Buy DLF 220 PUT in the range of 1 to 1.50. Target 4.8/7.3/8.5
It could go up to 7/8 in next three trading sessions. Infrastructure stocks are in down trend and if DLF goes below 227 in cash it could slide down to below 220. It has to cross many supports till it reaches 214/208/196, but since it is in strong downward move, it is possible to break all supports.
It is worth investing Rs. 1000-1500 and expect bigger profit.
It is advisable to keep it till expiry of this month.
Maximum loss 1000/1500 with unlimited profit potential.

Ranbaxy:
USFDA is going to decide on consent decree of Ranbaxy tomorrow. It will be at our night time though. If Ranbaxy could not satisfy FDA, many products could be under jeopardy. Though Ranbaxy is known to settle issues at the last moment, this time it could be difficult because many products could be under FDA scanner. On some of these products Ranbaxy is sitting on 180 days exclusivity. If valsartan is one of them, then loss to Ranbaxy will be huge.  If Ranbaxy misses this opportunity, investors will not like that.

Technically, stock reverted from 50% retracement level on Friday.

Bear spread strategy
Buy Ranbaxy 420 PUT between 4.4-5.0 and Sell 400 PUT between 1.50-2.00.
Maximum loss could be 1400 to 1500 (excluding brokerage) but profit potential is above 8000 if Ranbaxy closes below 400 due to adverse outcome of the consent decree.


If you have earned good profit this month and sitting on cash, then it is worth risking this 2500/-

Disclaimer: This blog does not take any responsibility of your profit/loss