Here's a Bull Spread strategy on Tata Power by Nandish Shah of HDFC Sec

The stock price of Tata Power has witnessed running correction of 10 per cent from the recent high and has reached to a support level which, HDFC Securities believes, is a good buying opportunity

Bull spread Strategy on Tata Power

Buy Tata Power Feb 80 Call at Rs 3.9 & simultaneously sell Feb 85 Call at Rs 2.50

Lot Size 13500

Cost of the strategy Rs 1.4 (Rs 18900 per strategy)

Maximum profit Rs 48600 If Tata Power closes at or above 85 on 25 Feb expiry.

Breakeven Point Rs 81.4

Rationale:

1. Long build up was seen in the Tata Power Futures' where we have seen 3 per cent rise in the Open Interest with price rising by 1 per cent.
    
2. We have seen healthy rollover of 85 per cent to the February series with increase in rollover cost.
    
3. The