F&O Strategy: Nandish Shah recommends Bull Spread on PowerGrid Corp

The derivative analyst from HDFC Securities recommends to Buy PowerGrid 222.50 Call and simultaneously Sell 230 Call for the March expiry.

Derivative Strategy

BULL SPREAD Strategy on POWERGRID

Buy PowerGrid (29-March Expiry) 222.5 CALL at Rs 4.5 & simultaneously sell 230 CALL at Rs 2

Lot Size: 2,700

Cost of the strategy: Rs 2.50 (Rs 6,750 per strategy)

Maximum profit: Rs 13,500; If PowerGrid closes at or above Rs 230 on expiry day.

Breakeven Point: Rs 225

Approx margin required: Rs 21,000

Rationale:

• Long build up is seen in the PowerGrid Future, where we have seen 18 per cent addition in Open Interest with price rising by 1 per cent.
   
• Short term trend of PowerGrid turned bullish as stock price closed above its 5 and 20 day EMA.
   
• RSI oscillator is placed near 60 and rising upwards on the daily chart, indicating strength in the current uptrend.
   
• Plus DI is trading above minus DI while ADX line has started sloping upwards, indicating stock price is likely to gather momentum in the coming days.
   
• Power sector has been outperforming during last few days.

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.