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Published on 8/05/2020 4:31:20 PM | Source: ICICI Direct

Buy Mahindra and Mahindra Financial Services Ltd Ltd For Target Rs. 212 - ICICI Direct

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Covered Call: Buy M&M Finance May future at Rs. 177-180 & sell 200 Call at Rs.11-13, Target: Rs. 212, Stop loss: Rs.149.5, Time frame: Till May expiry

* Despite the Nifty correcting from 9850 and rupee depreciating to 76 from 75 levels, the NBFC space consolidated and saw accumulations at lower levels. Most NBFC stocks witnessed some buying interest and remained at the higher band of the consolidation

* M&M Financial is one stock among the pack, which was facing supply near | 175 levels. However, as the May series progressed, the stock saw fresh OI additions and managed to close above | 175 levels, indicating fresh long accumulation

* Due to elevated IVs, options pricing is attractive. Huge OI additions were seen in OTM strike Puts of 150, which is also the highest Put base and major support. Whereas the highest Call base is placed to 200 strike followed by 220 strike. We feel a close above 200 would open the gates for higher targets whereas Put writing OI would provide cushion at lower levels. Hence, Covered Call strategy can be formed due to higher option premium

* As the stock consolidated, the IV-spread of Nifty/M&M Finance remained muted near its mean levels. However, buying in OTM strike Calls can be seen, which will pull the IV-spread higher towards its Mean + 2 Sigma levels. This will be a positive trigger

 


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