Analyst suggests 'Bull Spread' on Midcap Nifty, Sun Pharma; check strategy
Nandish Shah of HDFC Securities has shared Bull Spread' on strategy on Midcap Nifty and Sun Pharma
 "Analyst suggests 'Bull Spread' on Midcap Nifty, Sun Pharma; check strategy")
Derivative strategy by Nandish Shah of HDFC Securities
1) BULL SPREAD STRATEGY ON MIDCP NIFTY
- Buy MIDCP NIFTY (26-May Expiry) 14,000 Call at ₹280 & simultaneously sell 14,200 Call at ₹80
- Lot Size 120
- Maximum profit ₹14,400 if MIDCP NIFTY closes at or above 14,200 on 26 May expiry.
- Maximum Loss ₹9,600 If MIDCP NIFTY closes at or below 14,000 on 26 May expiry.
- Breakeven Point ₹14,080
- Risk Reward Ratio 1:1.5
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- Approx margin required ₹33,000
Rationale:
- Long build up is seen in the MIDCAP NIFTY Futures at lower levels, where Open interest rose by 6 per cent along with price rising more than 1.5 per cent from the morning lows.
- Primary trend remains up as MIDCP NIFTY is placed above its 100 and 200 day EMA.
- Amongst the options, Put writing is seen at 13,800-14,000 levels.
Note : It is advisable to book profit in the strategy when ROI exceeds 20 per cent.
2) BULL SPREAD Strategy on Sun Pharma
- Buy SUN PHARMA (26-May Expiry) 1,820 CALL at ₹42 & simultaneously sell 1860 CALL at ₹25
- Lot Size 350
- Maximum profit ₹8,050 if Sun Pharma closes at or above 1,860 on 26 May expiry.
- Maximum Loss ₹5950 if Sun Pharma closes at or below 1,820 on 26 May expiry.
- Breakeven Point ₹1837
- Risk Reward Ratio 1:1.35
- Approx margin required ₹22,000
Rationale:
- Long build up is seen in the Sun Pharma Futures where we have seen rise in OI with price rising by 1.80 per cent.
- Short term trend of the Sun Pharma stock is positive as it is placed above its 5 and 20 day EMA
- Stock price has broken out on the daily and weekly chart with higher volumes.
- Momentum Indicators and Oscillators are in rising mode and placed above 50 on the daily chart, suggesting strength in current uptrend.
Note : It is advisable to book profit in the strategy when ROI exceeds 20 per cent.
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(Disclaimer: This article is written by Nandish Shah, senior technical/derivative analyst, HDFC Securities. View expressed are his own.)