The long-term outlook for Maruti Suzuki remains positive, as long as it stays above ₹5,572. The stock finds immediate support at ₹7,009 and the next one at ₹6,605. A conclusive close below ₹6,158 will trigger a sharp decline in the stock, and that could take Maruti to its crucial support zone. On the other hand, the stock finds immediate resistance at ₹7,261 and the next one at ₹7,458.
F&O pointers: The Maruti Suzuki September futures counter saw sharp swings in open interest position even as the underlying price moved up steadily in the last few days. Open positions, which stood at 10.45 lakhs on August 24, increased to a high of 20.68 lakh on August 31. Since then, the open interest positions witnessed wild swings and currently stand at 19.81 lakh shares. Maruti Suzuki at ₹7,224.95, still commands a healthy premium over the underlying close ₹7,190.10, signalling the existence of long positions. Options trading indicates a range of ₹6,500 and ₹7,500.
Strategy: We advise traders to consider selling the deep out-of-the-money call, as we expect a little upside for the stock from here. Traders could consider selling 8,000-strike-call that closed at a premium of ₹29.05.
As the market lot is 100 shares per contract, this strategy will ensure an inflow of ₹2,905 to traders, and that will be the maximum profit one can earn. For that to happen, Maruti Suzuki has to settle or close below ₹8,000.
However, a close above 8,029.05 will start hurting the position, and the loss could be unlimited if Maruti Suzuki rises sharply in quick time.
So this strategy is for traders who have deep pockets to withstand wild swings and pay margin commitments. Risk-averse traders can stay away from this strategy.
Follow-up: Last we advised a bull-call spread on Infosys, though it is currently in negative. As suggested, hold the position till the expiry of current series.
(Note: The recommendations are based on technical analysis and F&O positions. There is a risk of loss in trading.)