Nandish Shah of HDFC Securities suggests Bull Spread strategy on Lupin

Derivative Strategy

 

BULL SPREAD Strategy on LUPIN

 

Buy LUPIN (26-Dec Expiry) Rs 2,140 CALL at Rs 44 & simultaneously sell

Rs 2,200 CALL at Rs 22

• Lot Size 425
• Cost of the strategy Rs 22 (Rs 9,350 per strategy)
• Maximum profit Rs 16,150 If LUPIN closes at or above Rs 2,200 on 26 Dec expiry.
• Breakeven Point Rs 2,162
• Risk Reward Ratio 1:73
• Approx margin required Rs 32,000

 

Rationale:

• Long build up is seen in the Lupin Futures, where we have seen 2 per cent rise in the open interest with price rising by 1 per cent.
• Stock price has broken out from the downward sloping trendline, adjoining the highs of October 10 and November 4, 2024.
• Primary trend of the Lupin is positive as stock price is placed above its 200 day EMA.
• Momentum Oscillators like RSI and MFI is in rising mode and placed near 60 on the daily chart, indicating strength in the current uptrend.

Note : It is advisable to book profit in the strategy when ROI exceeds 20 per cent.  (This article is by Nandish Shah, senior technical/derivative analyst at HDFC Securities. Views expressed are his own.)