Nandish Shah of HDFC Securities recommends 'Bear Spread' on Nifty today

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Derivative Strategy

 

BEAR SPREAD Strategy on NIFTY

 

1) Buy NIFTY (31-October Expiry) 24400 PUT at Rs 131 & simultaneously sell 24200 PUT at Rs 70

 

Lot Size 25

  Cost of the strategy Rs 61 (Rs 1525 per strategy)

  Maximum profit Rs 3475 If Nifty closes at or below Rs 24200 on 31 Oct expiry.

  Breakeven Point Rs 24339

  Risk Reward Ratio 1: 2.28

  Approx margin required Rs 12200

 

Rationale

 

– Profit booking is seen in the Nifty Futures during the October series till now, where we have seen 6 per cent fall in the open interest with Nifty falling by 6.93 per cent.

 

– Short term trend of the Nifty remains weak as it is placed below its 5, 11 and 20 day EMA.

 

– RSI Oscillators is in falling mode and placed below 50 on the daily chart, indicating bearish trend.

 

– Amongst the NIFTY options, Call writing is seen at 24500-24600 levels.

 

Disclaimer: Nandish Shah is senior technical/derivative analyst at HDFC Securities. Views expressed are his own.