Here's a derivative strategy from HDFC Securities for Tata Steel

Views on derivative call by Nandish Shah, Senior Technical & Derivative Analyst, HDFC securities.

Bear Spread strategy on TATA STEEL

Buy TATA STEEL Put August 430: Put at Rs 14 & simultaneously sell 410 Put at Rs 8.
 

Lot Size:  1061.
 

Cost of the strategy: Rs 6 (Rs 6366 per strategy)
 

Maximum profit: Rs 14854 if Tata Steel closes at or below Rs 410 on August expiry.
 

Break-even point: Rs 424

Rationale:

-- Short  build  up is seen in the Tata steel Futures’ yesterday, where we have seen sharp rise in Open Interest with price falling by 1.27%.
 

-- Stock price has broken down from the bearish cup and handle pattern on the daily chart where it closes at two year low.
 

-- Stock price has been forming lower top lower bottom on the daily charts.
 

-- Stock price is trading below its 5, 20 and 200 day SMA Indicating weakness in the stock.
 

-- Oscillators and Momentum Indicators like RSI and MACD showing weakness in the stock on the daily and weekly charts.