 "Nandish Shah of HDFC Sec suggests 'Bull Spread' play for Bank Nifty today")
Derivative Strategy BULL SPREAD Strategy on BANK NIFTY
- Buy BANK NIFTY (30-Jan Expiry) 52,000 CALL at Rs 795 & simultaneously sell 52,500 CALL at Rs 570
- Lot Size 15
- Cost of the strategy Rs 225 (Rs 3375 per strategy)
- Maximum profit Rs 4,125 If BANK NIFTY closes at or above Rs 52,500 on 30 Jan expiry.
- Breakeven Point Rs 52,225
- Risk Reward Ratio 1: 1.22
- Approx margin required Rs 15,500
Rationale:
- Long build up is seen in the Bank nifty futures where we have seen 3 per cent rise in the open interest with it rising by 1.07 per cent.
- Short term trend turned positive as it has closed above its 5 and 11 day EMA.
- Bank Nifty took support at 200 day EMA and reversed northwards.
- FIIs long to short ratio in the Index Futures stands at an oversold levels of 0.16 levels, indicating higher probability of short covering by them in the days to come.
- Amongst the BANK NIFTY options, Put writing is seen at 51000-51500 levels.
(This article is by Nandish Shah, senior technical/derivative analyst at HDFC Securities. View expressed are his own.)