F&O Strategy: HDFC Securities recommends Bear Spread on Bank Nifty

Buy Bank Nifty 43800 Put option and simultaneously Sell 43400 Put of the 26-October expiry, recommends Nandish Shah, Sr. derivatives & technical research analyst of HDFC Securities.

Derivative Strategy

BEAR SPREAD Strategy on BANK NIFTY

Buy BANK NIFTY (26-October Expiry) 43800 PUT at Rs 272 & simultaneously sell 43400 PUT at Rs 139.5

Lot Size: 15

Cost of the strategy: Rs 132.5 (Rs 1,988 per strategy)

Maximum profit: Rs 4,012; If BANK NIFTY closes at or below Rs 43,400 on 26-Oct expiry.

Breakeven Point: Rs 43,667

Risk Reward Ratio: 1:2.02

Approx margin required: Rs 13,000

Rationale:

• Short build up is seen in the BANK NIFTY Futures during the October series till now, where Open Interest rose by 24 per cent with BANK NIFTY falling by 1.2 per cent.
   
• term trend of the Bank Nifty is weak as it has placed below its 5, 11 and 20-day EMA.
   
• Bank Nifty has broken down from the upward sloping trendline, adjoining the lows of 16-August and 09-October 2023 
   
• Amongst the BANK NIFTY options, Call writing is seen at 44000-44500 levels.

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.