F&O strategy: How to trade in ICICI Bank ahead of its Q4 results?
Upstox
3 min read • Updated: April 26, 2024, 5:32 PM
Summary
The ICICI Bank is currently trading above all its key daily moving averages, 20 and 50 and formed a bullish engulfing candle on 25 April, highlighting the support based buying. Furthermore, as per the options data the stock is implying a ±5.5% movement ahead of the 30 May expiry.
ICICI Bank is scheduled to announce its fourth-quarter results on Saturday, 27 April. The results are likely to influence both the NIFTY BANK and NIFTY50 on 29 April.
India's second largest private sector bank, is expected to report a year-on-year profit growth of over 13% to around ₹10,323 crore, although the quarter-on-quarter growth is expected to be marginal. Street is expecting a slight quarter-on-quarter decline in net interest margins.
Over the FY 2023-24, ICICI Bank's stock has risen 24%, outperforming the Nifty Bank Index, which gained 15% over the same period.
Ahead of the earnings announcement, let's take a look at the technical structure and options structure of the stock.
Technical view
The ICICI Bank is currently trading above all its key daily moving averages, 20 and 50 and is consolidating between 1113 and 1066 zone since last two months. On the daily chart, the stock formed a bullish engulfing candle on 25 April, highlighting the support based buying.
Options outlook
The 30 May expiry's open interest data highlights significant concentration of call and put option at the 1100 strike.
ICICI Bank’s 30 May ATM strike sits at 1120, with both the call and put options priced at ₹61. This suggests the traders are expecting a price movement of ±5.5% as of 25 April’s closing price. However, let's take a look at ICICI Bank's historical price behaviour during past earnings announcements in order to make more informed trading decisions.
Unlocking options with implied volatility
ICICI Bank’s options data for the 30 May expiry implies a potential price swing of ±5.5% in either direction, 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 price of the ICICI Bank moves significantly in either direction beyond the ±5.5% 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 ICICI Bank stays within the ±5.5% 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.