Derivatives analyst Nandish Shah recommends Bull Spread on Granules India

The analyst from HDFC Securities recommends buying Granules India 320 Call and simultaneously selling 340 Call of the September series.

Derivative Strategy

Bull Spread Strategy on Granules India

Buy Granules (29-Sept Expiry) 320 Call at Rs 11 & simultaneously sell 340 CALL at Rs 4

Lot Size 2,000

Cost of the strategy Rs 7 (Rs 14,000 per strategy)

Maximum profit Rs 26,000, if Granules closes at or above Rs 340 on 29-Sept expiry.

Breakeven Point Rs 327

Approx margin required Rs 36,000

Rationale:

• We have seen long build up in the Granules futures, where we have seen 10 per cent addition (Prov) in Open Interest with price rising by 4 per cent.
   
• Stock price has broken out on the daily chart with higher volumes.
   
• Momentum Oscillators like RSI (11) and MFI (10) is in rising mode and placed above 60 on the daily chart, Indicating strength in the current uptrend.
   
• Plus DI is trading above minus DI and ADX line is placed above 60 and started rising upwards, Indicating stock price is likely to gather momentum in the coming days.

Disclaimer: Nandish Shah is Technical Research Analyst at HDFC Securities. He doesn't hold any position in the stock. Views are personal.