F&O Call: Nandish Shah recommends Bear Spread strategy on Federal Bank

The derivative analyst from HDFC Securities recommends to Buy Federal Bank 128 Put and simultaneously Sell 125 Put for the December expiry.

Derivative Strategy

BEAR SPREAD Strategy on FEDERAL BANK

Buy FEDERAL BANK (29-Dec Expiry) 128 PUT at Rs 2.40 and simultaneously sell 125 PUT at Rs 1.4

Lot Size 5,000

Cost of the strategy: Rs 1 (Rs 5,000 per strategy)

Maximum profit: Rs 10,000; If Federal bank closes at or below Rs 125 on 29-Dec expiry.

Breakeven Point: Rs 127

Approx margin required: Rs 22,350

Rationale:

We have seen short build up in the Federal bank Futures on Thursday, where we have seen 7 per cent addition (Prov) in Open Interest with price falling by 2.6 per cent.

The stock price has broken below the upward sloping trendline, adjoining the lows of 20-June-2022 and 26-Sept-2022 on the daily chart.

The stock price has broken down on the daily chart, where it closes at lowest since 13-Oct.

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.