F&O trade: Derivatives strategy on IndiGo stock for November monthly expiry

Derivative Strategy

BULL SPREAD Strategy on INDIGO

• Buy INDIGO (25-Nov Expiry) 6000 CALL at ₹54 & simultaneously Sell 6200 CALL at ₹16
• Lot Size: 150
• Cost of the strategy: ₹38 (₹5,700 per strategy)
• Maximum profit: ₹24,300 If INDIGO closes at or above ₹6,200 on Nov 25 expiry.
• Breakeven Point: ₹6,038
• Risk Reward Ratio: 1: 4.26
• Approx margin required: ₹31,000

Rationale:

• Long build is seen in IndiGo stock futures. This is indicated by an increase in Open Interest (OI) by 2 per cent with a 1.90-per cent rise in IndiGo share price on Thursday, Nov 13. 
• The IndiGo stock price has broken out from the downward sloping trendline on the daily chart. 
• The short-term trend remains positive as the stock is placed above its 5, 11 and 20-day EMA. 
• Momentum Indicators and Oscillators are showing strength in the current uptrend.

 

    Note : It is advisable to book profit in the strategy when ROI exceeds 20 per cent.    ===================  Disclaimer: This article is by Nandish Shah, senior technical/derivative analyst, HDFC Securities. View expressed are his own.