Analyzing India

This Pharma Stocks Offers A Potentially Profitable Hedged Option Setup


Piramal Enterprises Limited -- PEL.IN

The stock has under-performed the Pharma Index over the past couple of weeks. Against the broader markets as well, the stock has not performed while it stayed in a prolonged sideways consolidation.

Currently, it is just broken out on the upside with greater-than-average volumes. The stock is placed much away from the center point on the RRG when bench-marked against both the broader NIFTY 500 Index and the Pharma Index. This creates a room for a larger alpha to be captured.

This technical setup creates a potentially profitable Hedged Option setup; presuming that the stock will move past the 1180 level and settle above that level by June 25 expiry. Based on this view, a short-term trader can consider the following spread:

Buying PEL 1140 CE 25JUN & Selling PEL 1180 CE 25JUN

By executing this, one would pay Net Premium of Rs. 17.50, i.e. Rs. 5377 (17.50*309). Maximum Profit Potential is Rs. 6983 and Maximum Loss Potential is Rs 5377.

Milan Vaishnav, CMT, MSTA

Consulting Technical Analyst

Disclosure pursuant to Clause 19 of SEBI (Research Analysts) Regulations 2014: Analyst, Family Members or his Associates holds no financial interest below 1% or higher than 1% and has not received any compensation from the Companies discussed.

Milan Vaishnav
About the author: , CMT, MSTA is a qualified Independent Technical Research Analyst at his Research Firm, Gemstone Equity Research & Advisory Services in Vadodara, India. As a Consulting Technical Research Analyst and with his experience in the Indian Capital Markets of over 15 years, he has been delivering premium India-focused Independent Technical Research to the Clients. He presently contributes on a daily basis to ET Markets and The Economic Times of India. He also authors one of the India's most accurate "Daily / Weekly Market Outlook" -- A Daily / Weekly Newsletter,  currently in its 15th year of publication. Milan's primary responsibilities include consulting in Portfolio/Funds Management and Advisory Services. His work also involves advising these Clients with dynamic Investment and Trading Strategies across multiple asset-classes while keeping their activities aligned with the given mandate. Learn More
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