F&O Strategy: Buy Coal India Futures

Coal India’s stock (₹398.8) hit a multi-year high of ₹401.50 last week. A close above the resistance at ₹393 means that the stock has positioned itself for further rally from the current level. Since there is a strong momentum, Coal India can be considered for short-term trading in derivatives. Choose between futures and options (F&O) based on your risk appetite.

Futures (₹400.5): The February futures of Coal India broke out of a barrier at ₹395 last week. The chart indicates that the contract is likely to witness more gains in the near term. But there could be a minor correction from the current level, possibly to ₹395.

So, traders can buy Coal India futures (February series) when the price moderates to the resistance-turned-support of ₹395. Place stop-loss at ₹378 at first. When the contract touches ₹410, alter the stop-loss to ₹398. When the price hits ₹415, tighten the stop-loss further to ₹408. Book profits at ₹420.

Options: We advise buying the 400-strike February expiry call option. It closed at ₹20.1 last week. Since there is a possibility of a price correction, wait for now and buy the call when the stock price dips to ₹393. When this occurs, the option price is likely to drop to the ₹16-18 price band.

Liquidate the call option at the prevailing price when Coal India stock price touches ₹415. But if there is a decline, exit the option at the prevailing price when the stock falls to ₹375.

Note: The recommendations are based on technical analysis and F&O positions. There is a risk of loss in trading