F&O strategy: How to trade in Maruti Suzuki ahead of its Q4 results?
Upstox
3 min read • Updated: April 26, 2024, 9:17 AM
Summary
Maruti Suzuki has been trading between 13,000 and 12,000 for the past month, protecting its 20 DMA on a closing basis. In addition, based on the straddle price of the 30 May expiry, the options market is expecting ±6% movement.
Maruti Suzuki will announce its fourth-quarter results for the FY24 today, 26 April and the results will be announced during the market hours.
In FY24, the share price of the carmaker rose 48%, outperforming the benchmark NIFTY50 index. However, it underperformed the NIFTY Auto index, which rose 72%.
India's largest carmaker is expected to report a net profit of ₹3,916 crore, up 50% YoY along with the significant growth in revenue from operations. Higher sales, improved offerings and increased share in SUV and export sales are likely to aid the overall profitability.
Before the earnings announcement, let’s take a closer look at the technical structure of the Maruti Suzuki along with the positioning of the options market .
Technical view
Maruti Suzuki currently maintains a higher-high and higher-low structure on the daily chart and is trading above its important 20 and 50 day moving averages (DMAs). The stock has been broadly consolidating in the 13,000-12,000 range for the past month and is protecting its 20 DMA on a closing basis.
Options outlook
The open interest data of the 30 May expiry of Maruti Suzuki has significant call OI at 13,000 and 13,500 strikes. Conversely, the put base is accumulated at 12,000 and 12,500 strikes.
As of 25 April, the at-the-money strike for Maruti Suzuki is at 13,000, with a total premium of ₹773 for both the call and put options, implying a move of ±6%. However, it's important to review the historical price trends of Maruti Suzuki during its last three quarterly earnings before devising any trading strategies.
How to use straddle prices for options strategy?
The options data of Maruti Suzuki suggests a possible price movement of ±6% till 30 May expiry, giving traders the opportunity to strategise based on the implied volatility.
Traders expecting volatility to rise may find the Long Straddle strategy advantageous. This involves buying an at-the-money (ATM) call and put option of Maruti Suzuki, each of the same strike price and expiry date. The aim of this strategy is to capitalise on large price movements - more than ±6% - in either direction.
Alternatively, a Short Straddle strategy could be suitable for traders who are predicting muted volatility or a range bound movement. This strategy involves selling an ATM call and put option of Maruti Suzuki, both of the same strike price and expiry, with the expectation that the price will remain stable within a range of ±6% after the earnings release.
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.