Option analysis of Lupin

‘When it rains, it pours’ is proving to be true for the pharmaceutical stocks. Firstly, we saw a pick-up in the demand for COVID-19 drugs due to the second wave, which acted as a key catalyst for the pharmaceutical stocks and it is now followed by a report by All Indian Origin Chemists & Distributors (AIOCD), which states that the domestic pharmaceutical market has seen a sharp rebound in the month of April with sales growing at a staggering 51.5 per cent over the last year.   

Among the bouquet of pharmaceutical stocks, one stock that stands out is Lupin. The stock is up by 15 per cent month-to-date and it is trading above its important moving average. Moreover, the stock is scheduled to announce its earnings on May 12, 2021. So, let’s check what does its derivative data indicate before the results.   

The stock is trading up by 3.41 per cent on NSE with its May Futures trading at a premium of Rs 5.80. It has seen an addition of 4.30 per cent in the open interest, which indicate a long built-up in the stock as usually, when a stock witnesses addition in the open interest along with a rise in price, it indicates long built-up.   

On the options’ front, in the money call option, the 1,200 Call option has seen a reduction in the open interest of 1.57 lakh. Meanwhile, the 1,220 Call option has seen an addition in open interest of 0.7 lakh in today’s session. The total open interest at 1,200 Call option stands at 4.26 lakh, which is the second-highest concentration of open interest on the Call side, which is the highest concentration of open interest seen at 1,300 Call option strike with an open interest of 7.43 lakh. On the Put side, the highest open interest concentration is at 1,100 put options, which is then followed by 1,200 put options. Besides, PCR stands at 0.73.   

So, from the above data, it’s clear that as the price has moved above Rs 1,200, the Call writers are feeling the jitters and squaring their positions while at the same time, they are seen active at 1,220 Call option strike. If the price manages to sustain above this level, the stock has headroom to scale towards the Rs 1,300 levels as well.