Nandish Shah of HDFC Sec recommends 'Bear Spread' strategy on Bank Nifty

BEAR SPREAD Strategy on BANK NIFTY

Buy BANK NIFTY (09-October Expiry) 51,800 PUT at Rs 284 & simultaneously sell 51,300 PUT at Rs 160

Lot Size 15

Cost of the strategy Rs 124 (Rs 1,860 per strategy)

Maximum profit Rs 5,640 If Bank Nifty closes at or below Rs 51300 on 9 Oct expiry.

Breakeven Point Rs 51676

Risk Reward Ratio 1: 3.03

Approx margin required Rs 15,600

Rationale:

Short build up is seen in the Bank Nifty Futures, where we have seen 29 per cent rise in the open interest with Bank Nifty falling by 2.04 per cent.

Short term trend of the Bank Nifty turned weak as it is placed below its 5, 11 and 20 day EMA.

RSI Oscillators is in falling mode and placed below 50 on the daily chart, indicating bearish trend.

Amongst the Bank NIFTY options, Call writing is seen at 52000-52500 levels.

(Nandish Shah is a technical research analyst at HDFC Securities. Views expressed are his own.)