F&O Strategy: Nandish Shah recommends Bull Spread on Bata India

The derivative analyst from HDFC Securities recommends buying Bata India 1840 Call and selling 1900 Call of the October series.

Bull Spread Strategy on Bata India

Buy BATA (27-oct Expiry) 1840 CALL at Rs 41.70 & simultaneously sell 1900 CALL at Rs 21.05

Lot Size 275

Cost of the strategy Rs 20.65 (Rs 5,679 per strategy)

Maximum profit Rs 10,821; if Bata closes at or above Rs 1,900 on 27-Oct expiry.

Breakeven Point Rs 1,860.65

Approx margin required Rs 23,000

Rationale:

• We have seen long build up in the Bata futures on Wednesday, where we have seen 6 per cent addition (Prov) in Open Interest with price rising by 1.28 per cent. 
   
• The stock price has formed double bottom around Rs 1,755 level.
   
• The short term trend of the stock turned positive as stock price is trading above its 5- and 11-day EMA.
   
• The 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.

Disclaimer: Nandish Shah is Sr. Derivatives & Technical Research Analyst at HDFC Securities. He doesn't hold any position in the stock. Views are personal.