Election strategy on L&T..

In my previous post I had written about strategy on Nifty (https://writingoptions.wordpress.com/2014/05/02/election-strategy-for-nifty/). Volatility should increase after last phase of polling on 12th May. With this thought process I am thinking about initiating similar strategy as in Nifty on Larsen & Toubro. Capital goods giant had a good run till last couple of weeks when it started correcting from its high of 1388 on NSE. Correct way to put it would be to say stock witnessed some profit booking ahead of an all important event on 16th May.

Since I am not sure which way election results would pan out, I am not initiating one way position and seeking to benefit from increase in volatility. I am planning to buy L&T 1260 straddle (1260 call & 1260 put) and sell 1400 call 1120 put. You need movement of 7.7% in L&T stock to make money from this strategy. Given the fact that stock had corrected from its recent high of 1388, it looks very much possible that L&T will go beyond 1400 on favourable outcome on 16th May. L&T is high beta and proxy play on Indian economy so its stock would react violently in negative direction in case market doesn’t get what it thinks as favourable outcome.

Disclaimer: These are my personal views and you should do your own due diligence before acting on anything written in this blog. Please take reasonable care while trading in options, especially while selling. I am not advising anyone to sell or buy options. My purpose of writing this blog is to highlight my trading strategies.


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