Nandish Shah of HDFC Securities recommends Bull Spread on Torrent Power

Torrent Power Sept futures have seen considerable long build up, with 80 per cent rise in open interest and 5 per cent rise in price.

Bull spread Strategy on TORRENT POWER

Buy TORRENT POWER SEPT 500 CALL at Rs 16.5 & simultaneously sell 520 CALL at Rs 9.5

Lot Size 1500

Cost of the strategy Rs 7 (Rs 10500 per strategy)

Maximum profit Rs 19500 If TORRENT POWER closes at or above 520 on 30 Sept expiry.

Breakeven Point Rs 507

Rationale:

• We have seen massive long build up in the Torrent Power Futures during the Sept series till now, where we have seen 81% rise in the Open Interest with price rising by 5%.
• Stock price is forming bullish higher top higher bottom formation on the weekly chart.
• Short and medium-term trend of the stock is positive as stock price is trading above its 5, 20 and 50 day EMA. 
• RSI Oscillators are placed above 60 and slopping upwards, Indicating strength 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.