F&O Strategy: Nandish Shah recommends Bull Spread on Hero MotoCorp

The derivative analyst from HDFC Securities recommends buying Hero MotoCorp 2750 Call and simultaneously selling 2800 Call of the November series.

Derivative Strategy

Bull Spread Strategy on Hero MotoCorp

Buy HEROMOTO CORP (24-Nov Expiry) 2750 Call at Rs 30 & simultaneously sell 2800 Call at Rs 18.5

Lot Size 300

Cost of the strategy Rs 11.5 (Rs 3,450 per strategy)

Maximum profit Rs 11,550; If Hero Moto Corp closes at or above Rs 2,800 on 24-Nov expiry.

Breakeven Point Rs 2,762

Approx margin required Rs 32,000

Rationale:

• We have seen long build up in the futures on Thursday, where we have seen 5 per cent addition (Prov) in Open Interest with price rising by 2 per cent.
   
• The stock price has broken out on the daily chart where it closed at its highest level since 26-Sept 2022.
   
• Primary trend of the Stock turned positive as stock price closed above its 200-day EMA 
   
• Momentum Oscillators like RSI (11) and MFI(10) are in rising mode and placed above 60 on the daily chart, indicating strength in the current uptrend.

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.