F&O strategy: Bull spread recommended on Tech Mahindra for April series

Nandish Shah of HDFC Securities recommends to Buy Tech Mahindra 1300 CALL and simultaneously Sell 1340 CALL for the April expiry.

Derivative Strategy

BULL SPREAD Strategy on TECH MAHINDRA

Buy TECH MAHINDRA (25-APRIL Expiry) 1300 CALL at Rs 30 and simultaneously sell 1340 CALL at Rs 16.5

Lot Size 600

Cost of the strategy Rs 13.5 (Rs 8,100 per strategy)

Maximum profit Rs 15,900; If Tech Mahindra closes at or above Rs 1,340 on 25 April expiry.

Breakeven Point: Rs 1,313.5

Risk Reward Ratio: 1:1.96

Approx margin required: Rs 27000

Rationale:

Long build up is seen in the Tech Mahindra Futures where we have seen 5 per cent rise in Open interest with price rising by 2 per cent.

Stock price has broken out from the downward sloping trendline, adjoining the highs of 23-Jan, 23 Feb and 12-March 2024.

The short term trend of the stock turned positive as stock price has closed above its 5-, 11- and 20-day EMA.

RSI Oscillator is in rising mode and placed above 50 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.