Analyst suggests 'Bull Spread' on Midcap Nifty, Sun Pharma; check strategy

Nandish Shah of HDFC Securities has shared Bull Spread' on strategy on Midcap Nifty and Sun Pharma

Derivative strategy by Nandish Shah of HDFC Securities 

1) BULL SPREAD STRATEGY ON MIDCP NIFTY

- Buy MIDCP NIFTY (26-May Expiry) 14,000 Call at ₹280 & simultaneously sell 14,200 Call at ₹80

- Lot Size 120

- Maximum profit ₹14,400 if MIDCP NIFTY closes at or above 14,200 on 26 May expiry.

- Maximum Loss ₹9,600 If MIDCP NIFTY closes at or below 14,000 on 26 May expiry.

- Breakeven Point ₹14,080

- Risk Reward Ratio 1:1.5

- Approx margin required ₹33,000

Rationale:

- Long build up is seen in the MIDCAP NIFTY Futures at lower levels, where Open interest rose by 6 per cent along with price rising more than 1.5 per cent from the morning lows.

 

- Primary trend remains up as MIDCP NIFTY is placed above its 100 and 200 day EMA.

- Amongst the options, Put writing is seen at 13,800-14,000 levels.

 

Note : It is advisable to book profit in the strategy when ROI exceeds 20 per cent.

2) BULL SPREAD Strategy on Sun Pharma

- Buy SUN PHARMA (26-May Expiry) 1,820 CALL at ₹42 & simultaneously sell 1860 CALL at ₹25

- Lot Size 350

- Maximum profit ₹8,050 if Sun Pharma closes at or above 1,860 on 26 May expiry.

- Maximum Loss ₹5950 if Sun Pharma closes at or below 1,820 on 26 May expiry.

- Breakeven Point ₹1837

- Risk Reward Ratio 1:1.35

- Approx margin required ₹22,000

Rationale:

- Long build up is seen in the Sun Pharma Futures where we have seen rise in OI with price rising by 1.80 per cent.

- Short term trend of the Sun Pharma stock is positive as it is placed above its 5 and 20 day EMA

- Stock price has broken out on the daily and weekly chart with higher volumes.

- Momentum Indicators and Oscillators are in rising mode and placed above 50 on the daily chart, suggesting strength in current uptrend.

 

Note : It is advisable to book profit in the strategy when ROI exceeds 20 per cent. 

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