CDSL share price: Bear Spread strategy, risk, reward, trade setup explained

Here is a Bear spread strategy for CDSL stock for Sept expiry, by Nandish Shah of HDFC Securities. Know entry price, breakeven, max profit, margin required, and technical outlook on CDSL stock

BEAR SPREAD strategy for CDSL stock

Buy CDSL (30-Sept expiry) 1,440 PUT at ₹43 & simultaneously Sell 1,400 PUT at ₹28

 

Lot size: 475

 

Cost of the strategy: ₹15 (₹7,125 per strategy)

 

Maximum profit: ₹11,875 if CDSL closes at or below ₹1,400 on 30 Sept expiry.

 

Breakeven point: ₹1,425

 

Risk-reward ratio: 1:1.67

 

Approx margin required: ₹24,000

Rationale:

• We saw long unwinding in CDSL stock on Thursday, indicated by a decrease in Open Interest (OI) of 6 per cent, along with a fall in share price by 3 per cent yesterday. 
• The primary trend in the stock has become weak as it fell below its 200-day EMA. 
• Further, CDSL share price has broken down on the daily chart from the upward sloping trendline. 
• Momentum indicators and oscillators are showing weakness in the current downtrend.

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

  =============  Disclaimer: Nandish Shah is a senior technical/derivative analyst at HDFC Securities. Views expressed are his own.