F&O Setup: Here's how to trade Bank Nifty with a 'Bull Spread' strategy

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Derivative Strategy

BULL SPREAD Strategy on BANK NIFTY

• Buy BANKNIFTY (30-Dec Expiry) 60100 CALL at ₹733 & simultaneously Sell 60500 CALL at ₹544
• Lot Size 35
• Cost of the strategy ₹189 (₹6615 per strategy)
• Maximum profit ₹7385 If BANK NIFTY closes at or above 60500 on 30 Dec expiry.
• Breakeven Point: ₹60289
• Risk Reward Ratio 1: 1.12
• Approx margin required: ₹42000

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Rationale:

• Long build up is seen in the Bank Nifty Futures where Open interest rose by 10 per cent along with a price rise of 0.40 per cent.
• Bank Nifty has broken out on the daily chart to close at all time high level.
• Bank Nifty is forming bullish higher top higher bottom formation on the daily chart.
• Bank Nifty Open Interest Put call ratio increased to 1.20 level from 1.18 levels on the back of Put writing at 59500-60000 levels.

Disclaimer: This article is by Nandish Shah, senior technical/derivative analyst, HDFC Securities. View expressed are his own.