 "Looking to ride the uptrend? Here's a strategy to generate alpha")
Recommended Strategy:
• Strategy: Nifty bull call spread
• Expiry: May 8, 2025
• Strike prices: Buy 25,000 call @153 and sell 25,300 call @63
• Net premium outflow: 90 points
• Stop loss: 45
• Target: 180 points
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Rationale:
• On Monday, Nifty opened gap up and decisively crossed the resistance zone near 24,590, supported by positive geopolitical developments that boosted overall sentiment.
• The Put-Call Ratio (PCR) improved significantly from 0.725 to 1.183, reflecting aggressive put writing and comparatively lower call writing, a sign of strengthening bullish sentiment.
• A bull call spread allows participation in the ongoing uptrend with a defined risk-reward profile, especially as the index approaches the psychological 25,000 mark.
• This strategy is ideal when expecting a moderate rise, as it reduces premium outflow compared to buying a naked call.
(This article is by Sahaj Agrawal, senior vice president, head of derivatives Research, Kotak Securities. Views expressed are his own.)