F&O: Here's a 'Bear Spread' for Nifty MidCap as it drops below 5, 20-DEMA

Analyst at HDFC Securities have recommended a 'Bear Spread' Strategy on the Nifty MidCap index as it has broken down from the upward sloping trendline, suggesting a weak outlook

BEAR SPREAD Strategy on MIDCAP NIFTY

 

Buy MIDCAP NIFTY (June 26 expiry) 12,700 PUT at ₹143 & simultaneously sell 12,600 PUT at ₹100

 

Lot Size:120

 

Cost of the strategy: ₹43 (₹ 5,160 per strategy)

 

Maximum profit: ₹6,840 if the MIDCAP NIFTY closes at or below 12,600 on June 26 expiry

 

Breakeven Point: ₹12,657

 

Risk Reward Ratio: 1: 1.33

 

Approx margin required: ₹31,000

 

Rationale:

 

>> Short build up was seen in the MidCP Nifty futures on Thursday, June 19, where we have seen a 5 per cent rise in open interest while the index fell 1.7 per cent.

 

>> Short-term trend of the Index remains weak as it is placed below its 5 and 20 day EMA.

 

>> The Nifty MidCap index has broken down from the upward sloping trendline, adjoining the lows of April 7 and June 13, 2025.

 

>> MidCap Nifty Put Call ratio came down to 0.77 levels from 0.93 on the back of aggressive call writing at 12,900-13,000 levels.

   

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

 

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