Analyst recommends 'Bull Spread' on Tata Steel; check detailed analysis

Nandish Shah of HDFC Securities has shared Bull Spread' on strategy on Tata Steel stocks

Bull Spread strategy on Tata Steel by Nandish Shah of HDFC Securities

 

• Buy TATA STEEL (24-Feb Expiry) 195 CALL at ₹4.5 & simultaneously sell TATA STEEL 200 CALL at ₹3 
• Lot Size 5500 
• Cost of the strategy ₹1.5 (₹8250 per strategy) 
• Maximum profit ₹19,250 If Tata Steel closes at or above 200 on 24 Feb expiry. 
• Breakeven Point ₹196.5 
• Risk Reward Ratio 1: 2.33 
• Approx margin required ₹36,500

Rationale:

• Long build up is seen in the Tata Steel Futures where we have seen sharp rise in OI
• with price rising by 2.5 per cent.
• Tata Steel stock price has broken out on the weekly and monthly chart.
• Stock price has been forming bullish higher top higher bottom formation on the
• weekly and monthly charts.
• Amongst the Options, put writing is seen at 180-184 level, suggesting limited
• downside in the stock.
• Momentum Indicators and Oscillators are showing strength in current uptrend.

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