Bull spread on Tata Motors, recommends Nandish Shah of HDFC Securities

Derivative Strategy

BULL SPREAD Strategy on Tata Motors

1) Buy Tata Motors (25-July Expiry) 1020 CALL at Rs 22 and simultaneously sell Rs 1,060 

CALL at Rs 10.6

Lot Size 550

Cost of the strategy: Rs 11.4 (Rs 6,270 per strategy)

Maximum profit: Rs 15,730 If Tata Motors closes at or above Rs 1,060 on 25 July

expiry.

Break Even Point: Rs 1,031.4

Risk Reward Ratio: 1:2.51

Approx margin required: Rs 19000

Rationale:

Long build up is seen in the Tata Motors Futures where we have seen 2 per cent (Prov) rise in Open interest with price rising by 2.31 per cent. Price rise is accompanied by the rise in the volume, suggesting strength in the up

move.

Stock price is on the verge of breaking out from the resistance zone of Rs 1,005-1,010 levels Momentum Indicators and Oscillators are showing strength in the current

uptrend of the stock.

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