 "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)
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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)