Nandish Shah of HDFC Sec suggests 'Bear Spread' strategy on Bank Nifty
Short build up is seen in the Bank Nifty Futures, where we have seen 6 per cent rise in the open interest with Bank Nifty falling by 1 per cent.
 "Nandish Shah of HDFC Sec suggests 'Bear Spread' strategy on Bank Nifty")
Derivative Strategy
Bear Spread Bear Spread Strategy on Bank Nifty
Buy Bank Nifty (30-October Expiry) 51,000 Put at Rs 360 & simultaneously sell 50,500 Put at Rs 230
Lot Size: 15
Cost of the strategy: Rs 130 (Rs 1,950 per strategy)
Maximum profit: Rs 5,550 If Bank Nifty closes at or below Rs 50,500 on 30 Oct expiry.
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Break even Point: Rs 50,870
Risk Reward Ratio: 1: 2.85
Approx margin required: Rs 15,500
Rationale
– Short build up is seen in the Bank Nifty Futures, where we have seen 6 per cent rise in the open interest with Bank Nifty falling by 1 per cent.
– Short term trend of the Bank Nifty turned weak as it is placed below its 5 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 51,500-52,000 levels.
(Disclaimer: Nandish Shah, senior technical/derivative analyst at HDFC Securities. Views expressed are his own.)