October 11, 2023

F&O Earnings Strategy: HDFC Bank Q2

Blog | F&O

HDFC Bank is all set to announce its September quarter results on 16 October. The closing price of the stock was ₹1,542 on 11 October.

Interested in trading options?

Let's understand what a straddle is.

Long straddle: A trader will buy a straddle if he or she believes that HDFC Bank will be volatile before 26 October 2023.

This strategy is deployed by buying at-the-money (ATM) call and put options of the same expiry and strike.

Short straddle: A trader will sell a straddle if he or she believes that HDFC Bank would not be volatile before 26 October 2023.

This strategy is deployed by selling ATM call and put options of the same expiry and strike.

Now, let’s find out critical levels while trading in HDFC Bank options contract

The premium for 1540 CE (ATM call option) is ₹26.25
The premium for 1540 PE (ATM put option) is ₹21.25
When we add these, we get the expected movement (up or down) from the current price. In this case, it’s 47.50 or ±3.08% of 1,542.
This means the upper range is ₹1,589.50 and the lower range is ₹1,494.50

Deploying straddle for HDFC Bank contract

For options traders, earnings announcements provide an opportunity to trade on the volatility.

Deploy a Long Straddle if you believe HDFC Bank will move more than (±3.08%)

Deploy a Short Straddle if you believe HDFC Bank will move less than (±3.08%)

Interested to know more about straddles? Check out our UpLearn education content. If you want to see more historical earnings price data like in the table above for this stock, sign-up for our community, let us know, and we will share it!

Disclaimer

Investments in the securities market are subject to market risk, read all the related documents carefully before investing. The securities quoted are exemplary and are not recommendatory. To know more visit https://upstox.com/

Derivatives trading must be done only by traders who fully understand the risks associated with them and strictly apply risk mechanisms like stop-losses. The information is only for consumption by the client and such material should not be redistributed. We do not recommend any particular stock, securities and strategies for trading. The stock names mentioned in this article are purely for showing how to do analysis. Take your own decision before investing.