Nandish Shah of HDFC Securities suggests Bull Spread strategy on M&M Fin

The primary trend of the stock is bullish as it trades above its 50, 100 and 200 day-EMA

BULL SPREAD Strategy on M&M Finance

Buy M&M Finance (23-Feb Expiry) 265 CALL at Rs 5 & simultaneously sell 270 CALL at Rs 2.65
 

Lot Size: 4,000

Cost of the strategy: Rs 2.35 (Rs 9,400 per strategy)

Maximum profit at Rs 10,600 if M&M Fin closes at or above 270 on 23 February expiry.

Breakeven Point: Rs 267.35

Approx margin required: Rs 37,500

Rationale:

>> We have seen long build up in the M&M Finance Futures yesterday, where we have seen 4 per cent addition in Open Interest, with price rising by 1.5 per cent.

>> Primary trend of the stock is bullish as it trades above its 50, 100 and 200 day-EMA.

>> RSI and MFI oscillator is placed above 60 and is rising upwards on the weekly chart, which indicates strength in the current uptrend.
 

>> Plus DI is trading above minus DI, while ADX line is placed above 30, signaling momentum in the current uptrend.

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Disclaimer: Nandish Shah is senior derivatives & technical research analyst at HDFC Securities. He doesn't hold any position in the stock. Views are personal.