On December 4, when the Sun Pharma stock was tanking on corporate governance concerns, a single trader (Client 1), took an exposure exceeding 3 per cent of the stock’s market wide position limit (MWPL) on its derivatives segment. The Sun Pharma share on Thursday attempted a bounce from its 52-week low of Rs 401.5 the previous day, closing up 1.11 per cent at Rs 417.55 on a day the benchmark index fell 1.7 per cent.
What Client 1 did with his exposure on Thursday (December 6) and whether his bets are bullish, bearish or a hedge is hard to tell. But, near-month options of Sun Pharma peg a strong support at Rs 400 and stiff resistances at Rs 460, Rs 480 and Rs 500.
According to Derivatives experts of Axis Securities believe that buying Sun at Thursday’s close of Rs 417.55 for a target of Rs 460 and stop loss of Rs 400 is an expedient strategy.
Stock options expiring on December 27 fit in with this view as the 400 strike put has the highest open interest of 24.89 lakh shares. The call at the 460 strike has the third-highest OI of a little over 20 lakh shares. The strategy has a risk -reward of around 2:1.
NSE data show that on December 4, Client 1 held 3.24 per cent of MWPL, which itself was 21,88,93,858 crore (21.88 crore). In absolute terms, the client held around 70.92 lakh shares of MWPL, a sizeable derivatives position
The Sun Pharma cash share tanked from around Rs 493 on November 30 to Rs 443 on December 4 when Client 1 initiated the position on the stock’s derivatives counter, as per NSE data. From Rs 443, the stock tumbled to Rs 413 on December 5, during which time Client 1 increased his exposure to 3.8 per cent of MWPL. On December 6, the stock edged marginally higher to Rs 417.55 (figures rounded off). The exposure for December 6 was not known as the data file from the exchange was not updated till the time of writing.
The average daily traded volumes from December 3 through December 6 were Rs 2,216 crore, a huge quantity compared with the three-month daily average of Rs 502 crore, indicating the punting interest in the stock. The daily delivery to traded quantity was 32.04 per cent against the three-month average of 33.86 per cent.
