Bull spread on Nifty Financial, recommends Nandish Shah of HDFC Securities

Derivative Strategy

Bull Spread Strategy on Nifty Financial

1) Buy Nifty Financial (23-July Expiry) 23,800 Call at Rs 210 & simultaneously sell 24,000 Call at Rs 126

Lot Size 40

Cost of the strategy Rs 84 (Rs 3,360 per strategy)

Maximum profit Rs 4,640 If Nifty Financial closes at or above Rs 24,000 on 23 July expiry.

Break even Point Rs 23,884

Risk Reward Ratio 1: 1:38

Approx margin required Rs 19,000

Rationale

--Short covering is seen in the Nifty Financial Futures on Thursday, where Open Interest fell by 4 per cent (Prov) with it rising by 0.57 per cent

--Nifty Financial has broken out on the daily chart, where it closes at highest level since 04-July-2024.

--Primary trend of the Nifty Financial remains positive as it is placed above its 50, 100 and 200 day EMA.

--Amongst the Nifty FInancial options, Put writing is seen at 23,700-23,800 levels.

 

Note: It is advisable to book profit in the strategy when ROI exceeds 20 per cent.
 

(Nandish Shah is a technical research analyst at HDFC Securities. Views expressed are his own.)