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Derivative Strategy
Bull Spread Strategy on Hero MotoCorp
Buy HEROMOTO CORP (24-Nov Expiry) 2750 Call at Rs 30 & simultaneously sell 2800 Call at Rs 18.5
Lot Size 300
Cost of the strategy Rs 11.5 (Rs 3,450 per strategy)
Maximum profit Rs 11,550; If Hero Moto Corp closes at or above Rs 2,800 on 24-Nov expiry.
Breakeven Point Rs 2,762
Approx margin required Rs 32,000
Rationale:
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We have seen long build up in the futures on Thursday, where we have seen 5 per cent addition (Prov) in Open Interest with price rising by 2 per cent.
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The stock price has broken out on the daily chart where it closed at its highest level since 26-Sept 2022.
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Primary trend of the Stock turned positive as stock price closed above its 200-day EMA
- Momentum Oscillators like RSI (11) and MFI(10) are in rising mode and placed above 60 on the daily chart, indicating strength in the current uptrend.
Note: It is advisable to book profit in the strategy when ROI exceeds 20 per cent.
Disclaimer: Nandish Shah is Sr. Derivatives & Technical Research Analyst at HDFC Securities. He doesn't hold any position in the stock. Views are personal.
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First Published: Fri, November 11 2022. 08:24 IST
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