Nandish Shah suggests Bull Spread on Bank Nifty ahead of Budget 2025

Stock Markets Today: Short term trend for Bank Nifty index has turned positive as it is placed above its 5 and 20 day EMA

BULL SPREAD Strategy on BANK NIFTY 

Buy BANKNIFTY (27-Feb Expiry) 50,000 CALL at Rs 990 & simultaneously sell 51,000 CALL at Rs 550 

Lot Size: 30

Cost of the strategy: Rs 440 (Rs 13,200 per strategy)

Maximum profit: Rs 16,800 if BANK NIFTY closes at or above 51,000 on 27 Feb expiry.

Breakeven Point: Rs 50440

Risk Reward Ratio 1: 1.27

Approx margin required: Rs 30,000

 

Rationale:

 

>> Long rollover was seen in the Bank Nifty futures on Thursday, January 30, where we saw 12 per cent (Prov) rise in the open interest on the day the index rose by 0.30 per cent. 

>> Short term trend has turned positive as it is placed above its 5 and 20 day EMA. 

>> Bank Nifty open interest put call ratio surged to 0.98 levels during the last few days, from 0.60 levels, suggesting limited downside from hereon. 

>> Amongst the Bank Nifty options (27-Feb-Expiry), aggressive Put writing is seen at 49,000-50,000 levels.

   

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Note : It is advisable to book profit in the strategy when ROI exceeds 20 per cent.  Disclaimer: Nandish Shah, Senior Technical/Derivative Analyst at HDFC Securities. Views expressed are his own.