F&O strategy: How to trade in Dabur India ahead of its Q4 results?
Upstox
3 min read • Updated: May 2, 2024, 12:26 AM
Summary
Dabur is currently trading below its important 50 and 200 day moving averages and is maintaining a lower-high and lower-low structure on the daily chart. Furthermore, based on options data suggesting a potential price movement of ±5.3%, traders have the opportunity to engage in either a long or short volatility strategy.
The FMCG giant will announce its fourth quarter results on Thursday, May 2, during market hours. For the fourth quarter of FY2024, the company is expected to post a 9% year-on-year increase in net profit to ₹320 crore, primarily driven by its domestic business expansion. However, both revenue and net profit are expected to remain subdued on a quarter-on-quarter basis.
Over the course of FY24, Dabur's shares underperformed, falling 4%, in contrast to the NIFTY FMCG Index, which gained 18%.
Technical view
Dabur is currently trading below its two important 50 and 200 day moving averages and maintains a lower-high and lower-low structure on the daily chart. The stock is currently trading near the 482-492 area, which has proven to be a support area in the longer term. On the other hand, immediate resistance is at 523, which coincides with the 20 DMA.
Options outlook
Based on options data of 30 May, the significant call open interest (OI) was seen at 550 and 510 strikes, while PUT OI was placed at 500 and 480 strikes.
Dabur’s 30 May ATM strike is at 510, with both the call and put options priced at ₹27. This suggests an implied price movement of roughly ±5.3% as of 30 April’s closing price. However, let's take a look at Dabur's historical price behaviour during past earnings announcements.
How can one configure an options trade?
Based on options data suggesting a potential price movement of ±5.3%, traders have the opportunity to engage in either a long or short volatility strategy.
For investors looking to take advantage of the higher volatility, the Long Straddle strategy could be one of the approaches. This method involves buying both an at-the-money (ATM) call and put option of Dabur with the same strike price and expiry date. The aim is to profit from a price movement of more than ±5.3% in either direction.
On the other hand, the Short Straddle strategy is well suited to scenarios where volatility is expected to fall. In this, a trader sells both ATM call and put option of Dabur, of same strike prices and expiry date. This approach expects Dabur's share price to move within a range of ±5.3% following the earnings announcement.
For more insight into Straddles and other options strategies, explore our UpLearn education content. And if you're interested in accessing more historical earnings data like the one above, join our community and let us know - we're here to help!
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.