Option Trading: Adopt Bear Spread on ICICI Bank, suggests HDFC Securities

Buy ICICI Bank 960 Put option and simultaneously Sell 940 Put of the September series, recommends Nandish Shah, Sr. derivatives & technical research analyst of HDFC Securities.

Derivative Strategy

BEAR SPREAD Strategy on ICICIBANK

Buy ICICI BANK (28-Sept Expiry) 960 PUT at Rs 10.15 & simultaneously sell 940 PUT at Rs 3.9

Lot Size 700

Cost of the strategy Rs 9.25 (Rs 4,375 per strategy)

Maximum profit Rs 9,625; If ICICI BANK closes at or below Rs 940 on 28 September

expiry.

Breakeven Point: Rs 953

Risk Reward Ratio: 1:2.20

Approx margin required: Rs 23,500

Rationale:

• The short build up is seen in the ICICI BANK Futures on Thursday where Open Interest rose by 7 per cent (Prov) with ICICI BANK falling by 2.8 per cent.
   
• The stock price has broken down from the upward sloping trendline, adjoining the lows of 16-March-2023 and 06-Sept-23
   
• Short term trend of the ICICI BANK turned weak as stock price is trading below its 5-, 11- and 20-day EMA.
   
• Momentum Oscillators like RSI and MFI have fallen below benchmark level of 50, indicting bearish trend.

Note: It is advisable to book profit in the strategy when ROI exceeds 20%.

Disclaimer: Nandish Shah is Sr. Derivatives & Technical Research Analyst at HDFC Securities. He doesn't hold any position in the stock. Views are personal.