Nandish Shah of HDFC Sec suggests 'Bull Spread' strategy on IRCTC

Derivative Strategy

 

Bull Spread strategy on IRCTC

 

Buy IRCTC (30-Jan expiry) 800 Call at Rs 11 & simultaneously sell

820 Call at Rs 5

 

Lot size: 875

 

Cost of strategy: Rs 6 (Rs 5,250 per strategy)

 

Maximum profit: Rs 12,250 If IRCTC closes at or above Rs 820 on 30 Jan expiry.

 

Breakeven Point: Rs 806

 

Risk Reward Ratio: 2.33

 

Approximately margin required: Rs 24300

 

Rationale:

 

– Short covering is seen in the IRCTC Futures, where we have seen 3 per cent fall in the open interest with price rising by 3 per cent.

 

–Stock price has broken out on the daily chart where it closes at highest level since 03-Jan.

 

–Stock price has broken out from the downward sloping trendline, adjoining the highs of 12-Dec-24 and 20-Jan-25

 

–Momentum Oscillators like RSI and MFI is in rising mode and placed above 50 on the daily chart, indicating strength in the current uptrend.

 

Note : It is advisable to book profit in the strategy when ROI exceeds 20%.

 

(Disclaimer: Nandish Shah, Senior Technical/Derivative Analyst at HDFC Securities. Views expressed are his own)