RIL may retain up-trend, analysts recommend a call ratio spread strategy

Mumbai: Rich traders with an appetite for risk could initiate a call ratio spread in Reliance Industries. Analysts believe the momentum, which drove the stock to a fresh high of ₹1514.90 Tuesday, could persist in the near term on hopes of improving prospects for its telco business amid debt concerns at rivals Vodafone Idea and Bharti Airtel.

The strategy consists of buying a 1520-strike call and simultaneously selling two calls at the 1580-strike. Both the options expire on November 28. The sale of the two higher strikes reduces the overall debit but also exposes the trader to unlimited risk, if the upside is sharper than expected. If the RIL share consolidates, the trader can book out with a small loss as the time decay will eat into the premia of the sold higher strikes too.