In Dr Reddy's and Gail, there's a climb in both futures and options OI along with a climb in PCR. My guess is that people are net long in these two counters with hedged short positions in the options segment.
There are four key stocks, which appear to have the technical capability to move either way. These are Grasim, ONGC, Satyam and TCS. Each has a "star doji" pattern of a relatively high daily range with the open and close near each other. Candlesticks experts consider this to be a sign of a big imminent move but it's tough to call the direction.
| Stocks with highest change in Futures OI | ||
| Cos | % chng | 1-m futures price |
| BEL | 73.61 | 813.80 |
| ABB | 38.06 | 1736.85 |
| Canara Bank | 29.91 | 225.35 |
| ITC | 28.93 | 127.35 |
| TCS | 22.18 | 1447.60 |
| Infosys | 21.46 | 2579.25 |
| NTPC | 21.28 | 108.20 |
| Siemens | 19.23 | 2549.70 |
| Tata Tea | 17.47 | 838.90 |
| BHEL | 16.71 | 1209.75 |
Given that these four stocks have considerable index weights, their movements would be crucial. We can use derivatives to try and cater for a strong movement away from the current spot price. A short analysis of these four stocks with trading suggestions follows.
Grasim: The spot is at 1313 and the futures is at 1316.7. Technically the stock looks capable of moving to either the 1360 level or down till the 1280 mark. Unfortunately, there isn't a great deal of depth in the futures market. A long 1320c is unavailable and a long 1320p would cost about 30. The only derivatives strategy that covers both angles is a long 1320p and a long October future.
ONGC: The spot is 1046 and the October future is at 1040. The stock could move anywhere between 1000-1090. We can take a long future to cover the upside and a bear-spread with long 1040p (25) versus short 1020p (20) to cover the downside. The bear-spread costs a net 5 and offers a maximum return of 15.
TCS: The October futures is 1447 and the spot is 1444. The stock could move between 1400-1495. A bear-spread with long 1440p (35) and short 1410p (40) presents an absurd picture as shown in the chart.
| Stocks with highest change in prem/(disc)* | ||
| Cos | last week | previous week |
| ICICI Bank | -1.10 | -23.85 |
| Tata Power | 1.10 | -3.85 |
| Cipla | 1.95 | -1.70 |
| Kochi Refineries | 0.90 | -0.45 |
| GNFC | 0.75 | 0.00 |
| J&K Bank | 1.55 | -1.70 |
| HDFC | 1.70 | -5.35 |
| Essar Oil | 0.30 | 0.05 |
| Mahindra & Mahindra | 2.00 | -0.40 |
| Glaxo SmithKline Pharma | 0.9 | -4.40 |
| * - prem/(disc) sorted as a % of cash prices | ||
These prices will certainly change but you may still get an excellent risk-reward ratio. A bull-spread with long 1440c (53.5) and short 1470c (40.4) costs 13 and could pay a maximum of 17.