F&O Strategy: Nandish Shah of HDFC Securities recommends Bull Spread on SBI

The technical and derivatives analyst recommends buying SBI 550 Call and simultaneously selling 570 Call for the September series.

BULL SPREAD Strategy on SBI

Buy SBI (29-Sept Expiry) 550 CALL at Rs 12.7 & simultaneously sell 570 CALL at Rs 5.7

Lot Size 1,500

Cost of the strategy Rs 7 (Rs 10,500 per strategy)

Maximum profit Rs 19,500; if SBI closes at or above Rs 570 on 29-Sept expiry day.

Breakeven Point Rs 557

Approx margin required Rs 39,000

Rationale:

We have seen long build up in the SBI futures, where we have seen 1 per cent addition (Prov) in Open Interest with price rising by 2.5 per cent.

The stock price has broken out on the daily chart with higher volumes, where it closes at all time high levels.

The stock price has also broken out from the downward sloping trendline on the daily chart.

Momentum Oscillators like RSI (11) and MFI (10) are in rising mode and placed above 60 on the daily and weekly chart, indicating strength in the current uptrend.

The plus DI is trading above minus DI and ADX line has started rising upwards, indicating stock price is likely to gather momentum in the current uptrend.

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