Nandish Shah recommends a Bull Spread on Glenmark Pharma for March expiry

The derivative analyst from HDFC Securities recommends to Buy Glenmark 460 Call and simultaneously Sell 480 Call of the March series.

Derivative Strategy

Bull Spread Strategy on Glenmark Pharma

Buy Glenmark Pharma (29-March Expiry) 460 CALL at Rs 12.5 & simultaneously sell 480 CALL at Rs 6.10

Lot Size: 1,450

Cost of the strategy: Rs 6.4 (Rs 9,280 per strategy)

Maximum profit: Rs 19,720; If Glenmark closes at or above Rs 480 on 29 March expiry.

Breakeven Point: Rs 466.4

Approx margin required: Rs 22,744

Rationale:

• We have seen long rollover to the March series in the Glenmark Future, where we have seen 11 per cent addition in Open Interest with price rising by 1 per cent.
   
• Primary trend of the stock turned bullish where it is trading above its 100 and 200 day EMA.
   
• RSI and MFI oscillator is placed above 60 and rising upwards on the daily and weekly chart, indicating strength in the current uptrend.
   
• Plus DI is trading above minus DI while ADX line is placed above 25, indicating momentum 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.