Nandish Shah of HDFC Securities recommends bear spread strategy on Nifty50

Derivative Strategy

BEAR SPREAD Strategy on NIFTY

1) Buy NIFTY (14-August Expiry) 24,100 PUT at Rs 195 and simultaneously sell 23,900 PUT at Rs 121

Lot Size 25

Cost of the strategy Rs 74 (Rs 1850 per strategy)

Maximum profit Rs 3150 If NIFTY closes at or below Rs 23,900 on 14 August expiry.

Breakeven Point Rs 24026

Risk Reward Ratio 1: 1:70

Approx margin required Rs 12000

Rationale:

>>Short build up is seen in the Nifty Futures during the August series till now, where we have seen 3 per cent rise in the open interest with Nifty falling by 1.20 per cent.

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

>>Momentum Indicators and Oscillators are showing bearish trend.

>>Amongst the NIFTY options, Call writing is seen at 24300-24500 levels.

(Nandish Shah is a technical research analyst at HDFC Securities. Views expressed are his own.)