 "F&O Strategy: Bull Spread on Nifty for November expiry")
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.
Also Read
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.