F&O Strategy: Bull Spread trades on Nifty Midcap, Biocon explained

Analyst at HDFC Securities have recommended a 'Bear Spread' Strategy on the Nifty MidCap index as it has broken out from the downward sloping trendline on the weekly charts

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Bull Spread strategy on MIDCP NIFTY

Buy MIDCP NIFTY (31-July Expiry) 13,500 Call at ₹261 and simultaneously sell 13,700 Call at ₹165

Lot size: 140

Cost of the strategy: ₹96 (₹13,440 per strategy)

Maximum profit: ₹14,560, if MIDCP NIFTY closes at or above 13,700 on 31 July expiry.

Breakeven point: ₹13,596

Risk reward ratio: 1: 1.10

Approx margin required: ₹38,000

 

Rationale:

• Long build-up is seen in the MIDCP NIFTY futures during the series till now, where open interest has risen by 3 per cent, with it rising by 1 per cent.
• The primary trend of the MIDCP NIFTY is positive as it is placed above its 50 and 100-day EMAs.
• It has been forming a bullish higher top, higher bottom formation on the daily chart.
• It has broken out from the downward sloping trendline on the weekly charts.
• The short-term trend of the index is positive as it is placed above its 5,11, and 20-day EMAs.

Bull Spread strategy on Biocon

Buy Biocon (31-July Expiry) 380 Call at ₹9.4 and simultaneously sell 390 Call at ₹5.9

Lot size: 2500

Cost of strategy: ₹3.5 (₹8750 per strategy)

Maximum profit: ₹16,250, if Bioson closes at or above ₹390 on 31 July expiry.

Breakeven point: ₹383.5

Risk reward ratio: 1:1.86

Approx margin required: ₹33,000

 

Rationale:

 

• Long build-up is seen in the Biocon Futures during the July series till now, where we have seen a 5 per cent rise in open interest with price rising by 7 per cent.
• Short-term trend remains positive, as the Biocon stock price is placed above its 5,11 and 20 day EMAs.
• The stock price has been forming a bullish higher top, higher bottom formation on the daily chart.
• RSI and MFI oscillators are in rising mode and placed above 60 on the daily chart, indicating strength in the current uptrend.

 

Note: It is advisable to book profit in the strategy when ROI exceeds 20 per cent. 

 

(Disclamier: This article is by Nandish Shah, senior technical/derivative analyst at HDFC Securities. Views expressed are his own.)