 "Looking for short-term F&O trade? Check this 'Bull Spread' on Eicher Motors")
BULL SPREAD Strategy on EICHER MOTORS
Buy EICHER MOTORS (June 26 expiry) 5,500 CALL at ₹58 & simultaneously sell 5,600 CALL at ₹25₹
Lot Size: 175
Cost of strategy: ₹33 (₹5,775 per strategy)
Maximum profit: ₹11,725 if EICHER MOTORS share price closes at or above ₹5,600 on June 26
expiry
Breakeven Point: ₹5,533
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Risk Reward Ratio: 1: 2.03
Approx margin required: ₹34,000
Rationale:
>> Long build up was seen in Eicher Motors Futures on Thursday, where the open interest rose by 2 per cent while the share price gained 1.86 per cent.
>> The short-term trend of Eicher Motors stock is strong as the stock price is placed above its 5,11, and 20 day EMA.
>> Eicher Motor share price has broken out from the downward sloping trendline on the daily chart with higher volumes.
>> RSI oscillator is 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. ALSO READ: F&O: Here's a 'Bear Spread' for Nifty MidCap as it drops below 5, 20-DEMA
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Disclaimer: Nandish Shah is a senior technical/derivative analyst at HDFC Securities. Views expressed are his own.