MUMBAI: A derivative instrument called an options contract is showing neutral to negative bias for Asian Paints and Bajaj Finserv, in the very short term. Both the companies reported their third quarter numbers on Thursday. Profitability of both declined from the year ago quarter, though Asian Paints delivered on the volume front.
In Asian Paints, which closed up half 0.7% at Rs 3303, traders sold a huge number of call options at Rs 3300 strike - the level at which the contract can be exercised. This implies they don’t expect the Asian Paints’ stock to rise above the strike sold plus the premium received from the options’ buyers, which stands at around Rs 60, the volume weighted average price of the call option.
The sellers will pocket the premium if Asian Paints falls or remains steady. “Options (calls or puts) are written or sold by market players normally considered financially more savvy than option buyers,” said SK Joshi, director, Khambatta Securities. “The strikes at which heavy writing happens are those levels the market is likely to respect.”
The downside for Asian Paints is Rs 3,240 followed by Rs 3,165, based on options data. On Bajaj Finserv, which closed down almost 5% at Rs 17250, put option sellers, who are bullish, covered their short positions at 18000, 17500 and 17000 strikes, which contributed to the stock’s fall. Data shows more downside for the stock until Rs 16500-16000 levels.
The supports and resistances for Asian Paints and Bajaj Finserv could be tested until January 27 when the options expire. Bajaj Finserv reported a year on year decline of 3% in its consolidated net profit at Rs 1,256 crore for Q3FY22. Its revenue, though, grew 10% through Rs 17,619 crore.