F&O Strategy: Here's why Nandish Shah recommends Bull spread on M&M Finance

The derivative analyst from HDFC Securities recommends to Buy M&M Finance 220 Call and simultaneously Sell 230 Call of the 29-December expiry.

Derivative Strategy

Bull Spread Strategy on M&M Finance

Buy M&M Finance (29-Dec Expiry) 220 Call at Rs 8.15 & simultaneously sell 230 CALL at Rs 4.15

Lot Size: 4,000

Cost of the strategy: Rs 4 (Rs 16,000 per strategy)

Maximum profit: Rs 24,000; If M&M Finance closes at or above Rs 230 on 29-Dec expiry.

Breakeven Point: Rs 224

Approx margin required: Rs 31,000

Rationale:

We have seen long build up in the M&M Finance futures on Thursday, where we have seen 4 per cent addition (Prov) in Open Interest with price rising by 2 per cent.

The short term trend of the stock is positive as it is trading