Option Traders Bet $16 Million On TCS Falling More In New Year
Trades like this are often executed to hedge against a decline in underlying values.
Option traders on the NSE are betting that information technology bellwether Tata Consultancy Services Ltd. will fall below Rs 1,840 apiece by February 2019 after its third-quarter earnings and the last budget prior to the general election in May.
While it’s not possible to identify the trader, Bloomberg’s Block Trade Monitor shows a notional amount of more than $16 million was wagered in two trades— one buying put options on TCS at Rs 1,840, or 7 percent below Friday’s Rs 1,989.75 close; and the other one selling call options at Rs 2,200, or 10 more above the last close.
Trades like these are often executed to hedge against a decline in underlying values. The aggregate premium for the trades was about $0.34 million, or 2.05 percent of the notional value is at risk.
On a relative basis, TCS shows strength with respect to Nifty, but the momentum has been declining consistently for the past 12 weeks. Since October, the stock witnessed a short build-up with open interest rising by 59 percent, while the price fell more than 11 percent.
The key option stability level to watch is at Rs 1,980 and a close below this will turn the bias negative.
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