Date:18/03/2005 URL: http://www.thehindubusinessline.com/2005/03/18/stories/2005031801661300.htm

Back Short turn likely in Satyam Computer, OBC

B. Venkatesh

THE following strategies are based on Thursday's trading in the derivatives segment on the NSE:

Satyam Computer: The March futures contract closed at 402. The outlook may turn positive if futures trade above 408. The upside target is 422.

Buy March futures after it moves above 408. Initiate the position with protective stop at 399. Trail the stop to control the downside risk. The margin on the futures position is approximately 17 per cent of the contract value. The minimum order size is 1,200 units.

Traders can alternatively construct ratio call spread. This position can be initiated with one long March 400 calls, one short March 420 calls and one short March 430 calls. The spread can be set up for 5 points. The position can payoff 19-20 points if the underlying moves to the price target of Rs 422 within 4-6 trading sessions.

Oriental Bank: The March futures closed at 340. The outlook may turn positive if futures trade above 358. The upside target is 375.

Buy March futures after it moves above 358. Initiate the position with protective stop at 338. Note that the initial stop is far away from the recommended entry level. Traders can alternatively place a protective stop at the day's low at the time the position is initiated. Either way, the risk-return trade-off may not be attractive, especially because the underlying is likely to be volatile. The margin on the futures position is approximately 19 per cent of the contract value. The minimum order size is 1,200 units.

Traders can alternatively set up a ratio call spread. This position can be initiated with one long March 350 calls and two short March 380 calls. The spread can be set up for a net debit of not more than 2 points. The position can payoff 15-17 points net if the underlying reaches a price target of Rs 377 within 5-7 trading sessions.

Those with very short-term horizon can buy March futures after it moves above 339. The position can be set up for a target of 345, with an initial stop at 336. It may be optimal to close the position intra-day.

(The opinion expressed in this column is based on technical analysis. There is risk of loss in trading.)