 "Siemens: Here's why Bear Spread strategy may be profitable for this stock")
BEAR SPREAD strategy on SIEMENS
Buy SIEMENS (31-Aug Expiry) 3,500 PUT at Rs 37 & simultaneously sell 3,400 PUT at Rs 15
Lot Size: 275
Cost of the strategy: Rs 22 (Rs 6,050 per strategy)
Maximum profit: Rs 21,450 if SIEMENS closes at or below Rs 3,400 on 31 August expiry.
Breakeven Point: Rs 3478
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Risk Reward Ratio: 1:3.55
Approx margin required: Rs 34,400
Rationale:
>> Short build up was seen in the Siemens Futures on Thursday where Open Interest rose by 3 per cent (Prov) with SIEMENS falling by 0.51 per cent.
>> Short-term trend of the Siemens turned weak as the stock price is trading below its 5,11 and 20-day EMA.
>> Stock price has broken down from the upward sloping trendline, adjoining the lows of 22-May-2023 and 20-July 2023
>> 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 per cent.
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Disclaimer: Nandish Shah is senior derivatives & technical research analyst at HDFC Securities. He doesn't hold any position in the stock/index. Views are personal.