F&O strategy: How to trade Bajaj Finance ahead of Q4 results?
Upstox
3 min read • Updated: April 24, 2024, 2:48 PM
Summary
In FY 23-24, Bajaj Finance has gained 27%, with maximum gains in the month of March 2024. The stock has been largely range-bound since October 2021. However, as per 30 May options data, the traders are implying a move of ±6.8% in Bajaj Finance
Non-banking finance heavyweight Bajaj Finance will announce its fourth quarter results of FY24 on 25 April. The results will be announced after market hours and the impact on the stock as well as indices will be reflected on Friday, 26 April.
In the third quarter, the company posted a net profit of ₹3,639 crore (+22% YoY), which missed street estimates due to higher provisioning. However, for the fourth quarter, the street is expecting positive signals on both the net profit and NIMs (net interest margins) front.
Moreover, the stock was recently in news as it plans to list its wholly owned subsidiary Bajaj Housing Finance.
Let’s take a look at the stock’s technical as well as options structure ahead of its earnings announcement.
Technical view
In FY 23-24, Bajaj Finance has gained 27%, with maximum gains in the month of March 2024. The stock has been largely range-bound since October 2021 and made an unsuccessful attempt to break out of this range in October 2023.
Currently, Bajaj Finance is trading above its 50-day moving average (DMA) and reclaimed its 200 DMA on the 22nd of April. Traders may want to keep a close eye on the key price points marked below in the chart, as a break above or below them on a closing basis will provide further directional clues.
Options outlook
The 30th May expiry's open interest data reveals significant concentration of call options at the 7500 and 7300 strikes, suggesting potential resistance for the stock at these levels. Conversely, the put options are spread between the 7000 and 6800 strikes, indicating support in that zone.
Bajaj Finance’s 30 May ATM strike sits at 7300, with both the call and put options priced at ₹494. This suggests an implied price movement of roughly ±6.8% as of 23 April’s closing price. However, let's take a look at Bajaj Finance's historical price behaviour during past earnings announcements in order to make more informed trading decisions.
Unlocking options with implied volatility
Bajaj Finance options data for the 30 May expiry implies a potential price swing of ±6.8%, offering strategic opportunities based on volatility expectations.
For those anticipating increase in volatility, a Long Straddle might be a suitable strategy. This involves buying an ATM call and put option of the same strike price and expiry. This strategy profits if the stock price moves significantly in either direction beyond the ±6.8% range.
However, if you believe volatility will be subdued, a Short Straddle might be a more appropriate strategy. This entails selling both ATM call and put options of same strike and expiry, profiting if the stock price stays within the ±6.8% range.
For more in-depth knowledge of the Straddle and other options strategy, consider exploring our UpLearn educational resources. And if you're interested in accessing more historical performance data and analytical tools, join our community for additional support.
Disclaimer
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 educational purposes. 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.