Nandish Shah recommends a Bull spread on Tata Power for January series

The stock has broken out on the daily chart with higher volumes to close at highest level since December 14.

Bull spread Strategy on TATA POWER
 

1) Buy TATA POWER Jan 230 CALL at Rs 9.25 and simultaneously sell 240 CALL at Rs 5.55

Lot Size 6,750
 

Cost of the strategy Rs 3.7 (Rs 24,975 per strategy)
 

Maximum profit Rs 42,525 if Tata Power closes at or above 240 on January 27 expiry.
 

Breakeven Point Rs 233.7

Rationale:

• We have seen long build up in Tata Power Futures, where we have seen 3%(Prov) rise in the Open Interest with price rising by 2.2 per cent.
• Stock price has broken out on the daily chart with higher volumes to close at highest level