Straddle Strategy in Reliance Industries

Reliance Industries on Friday signaled out strategies which may result in more volatility for the stock. Here are these:

1) Open Interest is up 12% (around 20 Lac New shares).

a) In Feb Futures, Open Interest added by 6% (5.7 Lacs new shares).

b) In Feb 540 Call, 560 Call and 580 Call, Open Interest of around 8 Lac shares have been added.

These are negative signals for the stock as it indicates call writing.

2) But on the technical charts, a long term support is seen at around 820-840 Rs levels, which is a bullish signal (See Below)

3) RSI is close to 30 now. At 20, it indicates oversold.

So, traders can go for Straddle strategy of buying both 840 Feb Calls and Puts with combined outflow of around 25-26 Rs (Rs. 6500 per pair).

One may put stop-loss at around 20 Rs. Traders can come out of the strategy, once any one of these reach 25 Rs.