 "Nandish Shah of HDFC Sec recommends 'Bull Spread' strategy on M&M Finance")
Buy M&M FINANCE (26-Sept Expiry) Rs 330 CALL at Rs 8.7 and simultaneously sell Rs 340 CALL at Rs 5.20
Lot Size: 2000
Cost of the strategy: Rs 3.5 (Rs 7000 per strategy)
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Maximum profit: Rs 13,000 If M&M Finance closes at or above Rs 340 on 26 Sept expiry.
Breakeven Point: Rs 333.5
Risk Reward Ratio: 1:1.86
Approx margin required: Rs 23000
Rationale:
Long build up is seen in the M&M Finance Futures during the September series till now where we have seen 7 per cent rise in Open interest with price rising by 5 per cent.
Stock price has broken out on the weekly chart from the downward sloping trendline with rise in volumes.
Stock price has been forming bullish higher top higher bottom formation on the monthly chart.
Momentum Indicators and Oscillators are showing strength in the current uptrend of the stock.
(Nandish Shah is a technical research analyst at HDFC Securities. Views expressed are his own.)