Analyst recommends 'Bull Spread' on IndiGo; check detailed analysis

BULL SPREAD Strategy on INDIGO by Nandish Shah of HDFC Securities

• Buy INDIGO (28-Oct Expiry) 5,900 CALL at ₹78 and simultaneously sell 6,000 CALL at ₹38
• Lot Size 150
• Cost of the strategy ₹40 (₹6,000 per strategy)
• Maximum profit ₹9,000, if INDIGO closes at or above 6,000 on Oct 28 expiry.
• Breakeven point ₹5,940
• Risk reward ratio 1:1.50
• Approx margin required: ₹31,000

Rationale:

• We saw the first sign long buildup on Thursday. This is indicated by an increase in Open Interest (OI) by 1 per cent, with a 0.3 per cent rise in the price.
• Short-term trend remains positive as it is placed above its 5, 11, and 20-day EMAs
• The stock price has broken out on the daily chart with higher volumes.
• Momentum Indicators and Oscillators are showing strength in current uptrend.

(Disclaimer: This article is by Nandish Shah, senior technical/derivative analyst, HDFC Securities. View expressed are his own.)