Derivatives Outlook | Options strategy for Bharti Airtel ahead of Q1 results today

India’s second-largest telecom company Bharti Airtel is poised to announce its first quarterly financial results on August 3 and analysts are looking at a strong performance with improved earnings.

In Q1FY24, the analysts expect Airtel to achieve an industry-leading revenue growth of 11 percent over the last year, which will drive India’s mobile EBITDA growth up by 17 percent. The company’s  growth is attributed to the increasing adoption of post-paid and 4G services, as well as steady customer acquisition during the quarter ended June.

The analysts expect Bharti Airtel’s consolidated net profit to rise around 60 percent on-year to Rs 2,676 crore in the period under study from Rs 1,606.9 crore last fiscal. Sequentially, it would be down 11 percent from Rs 3,005.6 crore profit clocked in Q4FY23.

Gaurav Bissa, VP at InCred Equities, holds a bullish view on Bharti Airtel since it was around Rs 800 levels. He highlights that the stock has shown a strong uptrend and is trading around the breakout area, forming higher tops and higher bottoms. According to Bissa, a close around Rs 890-895 levels may push the stock further up towards Rs 950 within the next one-two months.

Rahul Ghose, the Founder and CEO of Hedged, an algorithm-powered advisory platform, also shares a positive sentiment about Bharti Airtel stock. He believes that the stock is in a stellar uptrend and appears promising on the charts. For the August series, the price action suggests a positive to sideways movement, indicating a potential time correction rather than a price correction.

“Taking this view in mind, it is better to plan a hedged strategy that has both debit units as well as credit units. The hedged strategy is also keeping in mind that there is a possibility of a divergence forming on one of the momentum indicators which may materialise in the month,” he said.

Bharti Airtel Strategy Recommendation

Modified Collar 

Strategy Legs:

Buy August Futures Between 890 and 895

Buy 890PE August 31 Expiry

Sell 910CE August 31 Expiry

The strategy has an inbuilt stop-loss. This strategy shall be profitable if Bharti Airtel remains above the 890 mark in the August series.

In case Bharati Airtel goes below 870 after August 15, Ghose recommends to roll down the calls from 910 to 900 calls to get some extra credit to reduce your risk in the trade.

Payoff chart for modified collar strategy

‘Modified Collar’ strategy could be employed for hedging purposes to protect against potential downside risks while still allowing room for profit in the event of a continued uptrend. This strategy combines a long position on the stock with the purchase of out-of-the-money put options and the sale of out-of-the-money call options. It is a prudent approach to navigate potential market uncertainties and volatility while holding a positive outlook on the stock.

Bars reflect the change in OI during the day. Red bars show call option OI, and green bars show put option OI

As per open interest options data for Bharti Airtel scrip, significant call sold positions is observed. Heavy put writing at 890 levels followed by 900 and 920 can act as key resistance going ahead.

As investors and traders await Bharti Airtel’s financial results, market experts foresee a positive trajectory for the company’s performance and recommend suitable strategies to capitalize on the expected growth. However, they also advocate prudence and hedging to safeguard against unforeseen market movements.

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