Trend weak; adopt 'Bear Spread' on Nifty today: Nandish Shah of HDFC Sec

Nifty Today, Jan 10: Short build up is seen in the NIFTY futures, where we have seen 8 per cent rise in the open interest

BEAR SPREAD Strategy on NIFTY

 

Buy NIFTY (16-Jan Expiry) 23500 PUT at Rs 132 & simultaneously sell 23300 PUT at Rs 72

 

Lot Size: 75

 

Cost of the strategy: Rs 60 (Rs 4,500 per strategy)

 

Maximum profit: Rs 10,500 if NIFTY closes at or below 23,300 on 16 Jan expiry.

 

Breakeven Point: 23,440

 

Risk Reward Ratio: 1: 1.33

 

Approx margin required: Rs 35,000

 

Rationale:

 

>> Short build up is seen in the NIFTY futures, where we have seen 8 per cent rise in the open interest, with the underlying index falling by 0.69 per cent.

 

>> The short-term Nifty trend is weak as it is placed below its 5- and 11-Day EMA.

 

>> The Nifty index has broken down from the upward sloping trendline, adjoining lows of week ending 07-June 2024 and 22-Nov 2024.

 

>> Amongst the NIFTY options, aggressive call writing is seen at 23,800-24,000 levels.

 

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