Bullish trade in Can Fin Homes

[Michael Gonsalves]

Can Fin Homes has fallen nearly 15% in two days due to the unexpected resignation of its CEO.

Personally, I feel that there is a knee-jerk reaction and that the stock will recover.

So, I sold two lots of Puts of the strike price of Rs. 540.

I will take delivery of the stock it is closes below Rs 540 by 27th October.

[Michael Gonsalves]

Can Fin Homes has dipped considerably causing a huge MTM loss. In hindsight, I ought to have sold calls to neutralize the loss. I will do so on Monday. However, capital is a problem because I already have several other Puts which are in-the-money and will require delivery to be taken.

[Michael Gonsalves]

Can Fin is in the Ban and so I cannot add any short calls to neutralize the loss on the short puts.

[Michael Gonsalves]

To salvage the situation, I sold 2x of the 550 Call. The stock has also bounced a bit.

[Michael Gonsalves]

The strategy of selling Calls helped to neutralize the loss on the Puts. If the stock closes below Rs 540 by expiry, I will take delivery and selling Rs 540 Calls of November.

[Michael Gonsalves]

Can Fin jumped nearly 4% putting my overall position in a tidy profit. If the Calls get threatened, I will exit at cost.

[Michael Gonsalves]

Jefferies has recommended a buy of Can Fin Homes for a target price of Rs 635

"Jefferies On Can Fin
Buy, TP cut to Rs 635
Operating Results Beat; Clarity Around Mgmt Transition Key To Re-Rating
Strong Demand In Housing Should Drive 20% Loan CAGR Over FY22-25
NIM Ahead Of Est But Could Dip Over FY22-25
Raise FY23-25 EPS Est. By 9-10%"

https://twitter.com/nimeshscnbc/status/1582562786366074880

[Michael Gonsalves]

Though the stock is at 519, the 540PE is yielding a gain of Rs. 10800. In addition, the 550CE is also yielding a nice gain. So, I exited the positions for a gain of Rs 45500. I have placed an order for sale of two lots (1950) of the 500PE of the November expiry for Rs 14.