HDFC Sec's Nandish Shah recommends a Bull Spread strategy on L&T Fin

Derivative strategy

 

BULL SPREAD Strategy on L&T Finance

 

1) Buy L&TFIN (26-Dec Expiry) 145 CALL at Rs 5.3 and simultaneously sell

150 CALL at Rs 3.15

• Lot Size 4462
• Cost of the strategy Rs 2.15 (Rs 9,594 per strategy)
• Maximum profit Rs 1,2717 If L&T FIN closes at or above Rs 150 on 26 Dec expiry.
• Breakeven Point Rs 147.15
• Risk Reward Ratio 1: 33
• Approx margin required Rs 56,500

Rationale:

• Long build up is seen in the L&T Fin Futures, where we have seen 18 per cent rise in the open interest with price rising by 2.5 per cent.
• Short term trend of the L&T Fin turned strong as stock price closed above its 5. 11 and 20-day EMA.
• The stock price has broken out from the downward sloping trendline, adjoining the highs of 01-Oct and 21-Oct 2024
• MFI (Money Flow Index) Oscillator is in rising mode and placed above 60 on the daily chart, indicating strength in the current uptrend.

 

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