F&O Strategy: Bull Spread on Nifty for November expiry

Nandish Shah of HDFC Securities recommends to Buy Nifty 19900 CALL and simultaneously sell 20000 CALL of the November series.

Derivative Strategy

BULL SPREAD Strategy on NIFTY

Buy NIFTY (30-November Expiry) 19900 CALL at Rs 79 & simultaneously sell 20000 CALL at Rs 39

Lot Size 50

Cost of the strategy Rs 40 (Rs 2,000 per strategy)

Maximum profit Rs 3,000; If NIFTY closes at or above 20000 on 30 Nov expiry.

Breakeven Point Rs 19,940

Risk Reward Ratio 1:1.50

Approx margin required Rs 20,000

Rationale:

• Long build up is seen in the NIFTY Futures during the November series till now, where Open Interest rose by 10 per cent with Nifty rising by 5 per cent.
   
• NIFTY has broken out from the downward sloping trendline, adjoining the highs of 15-September and 17-October 2023 
   
• Short term trend of the NIFTY is strong as it has placed above its 11- and 20-day EMA.
   
• Amongst the NIFTY options, aggressive Put writing is seen at 19700 - 19800 levels.
   
• FIIs long to short ratio in the Index futures segment stands at an oversold level of 0.29 levels which in-turn suggest higher possibility of a short covering by them from heron.

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

Disclaimer: Nandish Shah is Sr. Derivatives & Technical Research Analyst at HDFC Securities. He doesn't hold any position in the stock. Views are personal.