Option strategy on Tata Steel by Chandan Taparia of MOSL

Option strategy: TATA STEEL (BULL CALL SPREAD)

 

BUY 1 LOT OF 630 CALL

SELL 1 LOT OF 640 CALL

BEP: 633.50

MAX RISK: 3.50 POINTS (Rs 7000/-)

MAX REWARD: 6.50 POINTS (Rs 13000/-)

 

Rationale:

 

1.     Positive sector outlook with sustained buying at every small decline

2.     It has been making higher top – higher bottom on weekly chart and given a decent weekly close

3.     A hold above 630 could take the stock towards 640-645 zones

4.     Fresh Put writing at 620 strike suggests limited downside

5.     Call unwinding in 620 and 640 strike suggests an up move

6.      Thus low risk Bull Call Spread is recommended

 

Disclaimer: The analyst may have positions in any or all the stocks mentioned above.