F&O Strategy: Bear spread on Bank Nifty, suggests HDFC Securities
RSI has fallen below benchmark level of 50 for Bank Nifty, indicating a bearish trend, says Nandish Shah of HDFC Securities
 "F&O Strategy: Bear spread on Bank Nifty, suggests HDFC Securities")
Bear Spread Strategy on Bank Nifty (17-August expiry)
Buy Bank Nifty 44,500 PUT at Rs 217 & simultaneously sell 44,000 PUT at Rs 87
Lot Size: 15
Cost of the strategy: Rs 130 (Rs 1,950 per strategy)
Maximum profit: Rs 5,550 if Bank Nifty closes at or below Rs 44,000 on 17 August expiry.
Breakeven Point: Rs 44,370
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Risk Reward Ratio: 1:2.85
Approx margin required: Rs 13,500
Rationale:
>> Short build up seen in Bank Nifty Futures on Thursday where Open Interest rose by 12 per cent (Prov) with Bank nifty falling by 0.76 per cent
>> Short build up seen in Bank Nifty Futures on Thursday where Open Interest rose by 12 per cent (Prov) with Bank nifty falling by 0.76 per cent
>> Short term trend of the Bank Nifty is weak as it is trading below its 5,11 and 20-day EMA
>> RSI has fallen below benchmark level of 50, indicating a bearish trend
>> RSI has fallen below benchmark level of 50, indicating a bearish trend
>> Amongst the Bank Nifty options, call writing is seen at 44,500-45,000 levels.
Note: It is advisable to book profit in the strategy when ROI exceeds 20 per cent.
Disclaimer: Nandish Shah is Sr. Derivatives & Technical Research Analyst at HDFC Securities. He doesn't hold any position in the stock/index. Views are personal.