Analyst recommends 'Bull Spread' on JSW Energy, IEX; check strategy

Nandish Shah of HDFC Securities has shared Bull Spread' on strategy on JSW Energy and IEX stock

Derivative strategy by Nandish Shah of HDFC Securities

1) Bull spread strategy on JSW Energy

• Buy JSW ENERGY (28-April Expiry) 540 CALL at ₹11.75 & simultaneously sell 550 CALL at ₹8.05
• Lot Size 1000
• Cost of the strategy ₹3.7 (₹3700 per strategy)
• Maximum profit ₹6300 If JSW ENERGY closes at or above 550 on 28 April expiry.
• Breakeven Point ₹543.7
• Risk Reward Ratio 1:1.70
• Approx margin required ₹99,000

Rationale:

• Short covering is seen in the JSW Energy Futures where we have seen fall in OI with price rising by 1.4 per cent.
• Short term trend of the stock is positive as it is placed above its 10 and 20 day EMA.
• Stock price has been taking support at 200-week EMA
• Momentum Indicators and Oscillators are showing strength in current uptrend.

2) Bull spread strategy on IEX

• Buy IEX (28-APRIL Expiry) 136 CALL at ₹2.90 & simultaneously sell 140 CALL at ₹1.40
• Lot Size 3750
• Maximum profit ₹9375 If IEX closes at or above 140 on 28 April expiry.
• Maximum Loss ₹5625 If IEX closes at or below 136 on 28 April expiry.
• Breakeven Point ₹137.5
• Risk Reward Ratio 1:1.70
• Approx margin required ₹18000

Rationale:

• Minor short covering is seen in the IEX Futures where we have seen fall in OI with price rising by 1.7 per cent.
• Short term trend of the stock turned positive as has crossed its 5, 11 and 20 day EMA
• Stock price has broken out on the daily chart to close at three month high.
• Momentum Indicators and Oscillators are in rising mode and placed above 50 on the daily chart, suggesting strength in current uptrend.

(Disclaimer: This article is by Nandish Shah, senior technical/derivative analyst, HDFC Securities. View expressed are his own.)