Looking to ride the uptrend? Here's a strategy to generate alpha

Recommended Strategy:

 

• Strategy: Nifty bull call spread

• Expiry: May 8, 2025

• Strike prices: Buy 25,000 call @153 and sell 25,300 call @63

• Net premium outflow: 90 points

• Stop loss: 45

• Target: 180 points 

 

Rationale:

• On Monday, Nifty opened gap up and decisively crossed the resistance zone near 24,590, supported by positive geopolitical developments that boosted overall sentiment.

• The Put-Call Ratio (PCR) improved significantly from 0.725 to 1.183, reflecting aggressive put writing and comparatively lower call writing, a sign of strengthening bullish sentiment.

 

• A bull call spread allows participation in the ongoing uptrend with a defined risk-reward profile, especially as the index approaches the psychological 25,000 mark.

• This strategy is ideal when expecting a moderate rise, as it reduces premium outflow compared to buying a naked call. 

 

 (This article is by Sahaj Agrawal, senior vice president, head of derivatives Research, Kotak Securities. Views expressed are his own.)