Investors & traders are making bullish bets on Can Fin Homes

Discussion in 'Traders Corner' started by Michael Gonsalves, Sep 20, 2022.

  1. Michael Gonsalves

    Michael Gonsalves Member Staff Member

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    Investors & traders are making bullish bets on Can Fin Homes. The stock has tanked due to the abrupt resignation of its CEO. Assuming the stock stages a recovery, intrepid investors & traders can hope to make quick-fire gains

    Some investors & traders prefer taking reversal trades i.e. hope that an oversold (quality) stock will bounce. We saw examples of such trades in the case of Balrampur Chini, Divis Lab, Bajaj Auto, Ultratech etc.

    Yesterday, Can Fin Homes plunged nearly 8% after the Company announced that its MD and CEO Girish Kousgi has resigned.





    There are rumours floating around that there is a fraud detected which led to the resignation.

    The plunge continued today with the stock presently down about 6%.

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    Experts say core fundamentals are healthy and have advised that the stock is a good buy.

    Jefferies stated that though Girish Kousgi’s resignation is a setback and uncertainty around management change would be an overhang in the near term, the stock can be bought for a target price of Rs 730. They also stated if an external CEO from the industry is appointed, it would be better rather than a CEO deputed from Canara Bank. They opined that the core fundamentals are healthy.





    Traders sell Puts of Can Fin Homes of the strike price of Rs 540

    Anyway, in the expectation that the stock will recover sooner or later, some traders sold Puts of the strike price of Rs 540 for a premium of Rs 33.95 of the October expiry.

    The Break-even point is Rs. 507. Assuming the stock closes above Rs 540, the trader will keep the entire premium of Rs. 33,101 (lot size of 975 x Rs 33.95.

    If the stock closes below Rs 540, the investor/ trader will take delivery of the stock by paying the full price of Rs 5,26,500 and thereafter sell Calls on it.

    This strategy is popularly known as the “Wheel strategy’.

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    Last edited: Sep 20, 2022
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