Bajaj Finance Options strategy: HDFC Securities suggests Bull Call Spread

Nandish Shah of HDFC Securities suggests Bajaj Finance bull call spread for 24 Feb expiry. Check cost, max profit, breakeven, margin, and technical rationale

BULL SPREAD Strategy on BAJAJ FINANCE

Buy BAJAJ FINANCE (24-Feb Expiry) 1020 CALL at ₹12 and simultaneously sell 1040 CALL at ₹6.5

Lot Size: 750

  Cost of the strategy: ₹5.5 (₹4,125 per strategy)

  Maximum profit: ₹10,875 if BAJAJ FINANCE closes at or above ₹1,040 on 24 Feb expiry

  Breakeven Point: ₹1,025.5

  Risk Reward Ratio: 1: 2.64

  Approx margin required: ₹26,000

Rationale: 

>> Long build-up is being seen in BAJAJ FINANCE Futures. There was a sharp rise in open interest (OI) on Thursday, along with a rise in stock price by 3.6 per cent.

 

>> Bajaj Finance share price has broken out on the daily chart with higher volumes.

 

 

>> Primary trend of Bajaj Finance stock is positive as it is placed above its important moving averages.

 

>> Momentum Indicators and Oscillators are showing strength in the current uptrend.

   

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

   

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