Derivatives strategy on Berger Paints by Nandish Shah of HDFC Securities

Bull Spread strategy on Berger Paints

Buy Berger Paint March 580 Call at Rs 14.50 & simultaneously sell 600 call at Rs 8.50

Lot Size: 2,200.

Cost of the strategy: Rs 6 (Rs 13,200 per strategy)

Maximum profit: Rs 30,800 if Berger Paints closes at or above Rs 600 on March expiry.

Break-even point: Rs 586

Rationale:

-- Long build-up is seen in the Berger Paints Futures where we have seen rise in Open Interest with price moving up by 1.70 per cent.
 

-- After forming multiple bottoms around 565 odd levels, the stock gave a breakout on the daily chart yesterday

-- Stock prices closed at five-day high yesterday with higher volumes

-- Primary trend of the stock is positive where it is trading above its 5,20, and 200-day SMA

-- RSI Oscillators showing strength in the stocks on the daily charts