F&O Call: Nandish Shah recommends Bear Spread strategy in HAL

The derivative analyst from HDFC Securities recommends to Buy HAL 2600 Put and simultaneously Sell 2500 Put for the December expiry.

BEAR SPREAD strategy on HAL

Buy HAL (29-Dec Expiry) 2600 PUT at Rs 51 & simultaneously sell 2500 PUT at Rs 19

Lot Size 475

Cost of the strategy Rs 32 (Rs 15,200 per strategy)

Maximum profit Rs 32,300; If HAL closes at or below Rs 2,500 on 29-Dec expiry.

Breakeven Point Rs 2,568

Approx margin required Rs 43,300

Rationale:

• We have seen short build up in the HAL Futures on Thursday, where we have seen 4 per cent addition (Prov) in Open Interest with price falling by 3.3 per cent.
   
• The stock price has broken down on the daily chart, where it closes at one month low.
   
• Further, the stock has broken below the upward sloping trendline, adjoining the lows of 13-May-2022 and 14-Nov-2022 on the daily chart.
   
• Momentum Oscillators like RSI (11) and MFI (10) are placed below 40 on the daily chart, indicating strength in the current downtrend.

Note : It is advisable to book profit in the strategy when ROI exceeds 20 per cent.

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