Voltas sees long build up: Here's a Bull Spread Strategy for the stock

Derivative Strategy

BULL SPREAD Strategy on VOLTAS
 

Buy Voltas Dec 28 Expiry 880 CALL at Rs 25.25 and simultaneously sell 920 CALL at Rs 12.7

Lot Size 600
 

Cost of the strategy: Rs 12.55 (Rs 7,530 per strategy)
 

Maximum profit: Rs 16,470 if Voltas closes at or above Rs 920 on 28 Dec-expiry.

Breakeven Point: Rs 892.55
 

Risk Reward Ratio- 1:2.19
 

Approx margin required: Rs 18.000

Rationale:

>> Long build up is seen in the Voltas Futures on Thursday where Open Interest rose by 7 per cent (Prov) with the stock rising 2.49 per cent.

>> Stock price has broken out from the downward sloping trendline, adjoining the highs of Sept 11, 2023 and Nov 12, 2023.

>> Stock price has broken out on the daily chart with higher volumes.

>> Oscillator like RSI and MFI are in rising mode and placed above 60 on the daily chart, indicating strength in the stock.

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

Disclaimer: Nandish Shah is Research Analyst (Technical and Derivative), HDFC Securities. Views are his own. He does not have any holding in the stock mentioned above.