F&O strategy: Bull spread recommended on BEL for February expiry

Nandish Shah of HDFC Securities recommends to Buy BEL 195 CALL and simultaneously Sell 200 CALL of the February expiry.

BULL SPREAD Strategy on BEL

Buy BEL (29-FEB Expiry) 195 CALL at Rs 4.75 & simultaneously sell 200 CALL at Rs 2.9

Lot Size 5700

Cost of the strategy Rs 1.85 (Rs 10,545 per strategy)

Maximum profit Rs 17,955; If BEL closes at or above Rs 200 on 29-Feb expiry.

Breakeven Point Rs 196.85

Risk Reward Ratio 1:1.70

Approx margin required Rs 39,000

Rationale:

• Long build up is seen in the BEL Futures where we have seen 10 per cent rise in OI with price rising by 4 per cent.
   
• The stock price has broken out on the daily chart with higher volumes, to close at all time high levels.
   
• The stock price has been forming bullish higher top higher bottom formation on the weekly charts.
   
• RSI Oscillator is in rising mode and placed above 60 on the daily chart, indicating strength in the stock

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.