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Derivative strategy on Sun Pharma by HDFC Securities

Derivative strategy by Nandish Shah, Senior Technical & Derivative Analyst, HDFC Securities

Trading Strategy

Bull Spread strategy on Sun Pharma

Buy Sun Pharma July 400 Call at Rs 10; Lot size: 1,100

Target: Rs 420 call at Rs 3.6.

Cost of the strategy Rs 6.4 (Rs 7,040 per strategy)

Maximum profit: Rs 14,960 If Sun Pharma closes at or above 420 on July expiry.

Break-even Point: Rs 406.4

Rationale:

Long build-up is seen in the Sun Pharma Futures’ yesterday, where we have seen rise in Open Interest with price rising by 1.5 per cent.
 
Stock price formed double bottom around 367 levels and reversed nothwards to close above its 5 and 20 day SMA.

Oscillators and Momentum Indicators like RSI and MACD showing strength in the stock on the daily and weekly charts.

In the Option segment, we have seen Open Interest addition at 430-440 levels