F&O strategy: Bull spread recommended on UBL for March series

Nandish Shah of HDFC Securities recommends to Buy UBL 1700 CALL and simultaneously Sell 1800 CALL for the March expiry.

Derivative Strategy

BULL SPREAD Strategy on UBL

Buy UBL (28-MARCH Expiry) 1700 CALL at Rs 51.7 & simultaneously sell 1800 CALL at Rs 19.5

Lot Size 400

Cost of the strategy Rs 32.2 (Rs 12,880 per strategy)

Maximum profit Rs 27,120; If closes at or above Rs 1,800 on 28-March expiry.

Breakeven Point: Rs 1,732.2

Risk Reward Ratio: 1:2.11

Approx margin required: Rs 23,800

Rationale:

• Long build up is seen in the UBL Futures where we have seen 29 per cent rise in Open interest with price rising by 2.17 per cent.
   
• The stock price has formed bullish engulfing pattern on the daily chart with rise in volumes.
   
• The stock price has been taking support at 200-day EMA since last few months.
   
• RSI Oscillator has come out from the overbought zone which Indicates higher possibility of a bullish trend reversal.

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.