Bull Spread strategy for IndiGo Feb expiry amid strength on daily charts

Oscillators like RSI and MFI are in rising mode and placed above 60 on the daily chart, Indicating strength in the stock, as per Nandish Shah

Bull Spread Strategy on IndiGo

Buy IndiGo Feb 29 expiry 3100 CALL at Rs 123 and simultaneously sell 3300 CALL at Rs 58

Lot Size: 300

Cost of the strategy: Rs 65 (Rs 19,500 per strategy)

Maximum profit: Rs 40,500 if IndiGo closes at or above Rs 3,300 on Feb 29 expiry.

Breakeven Point: Rs 3,165

Risk Reward Ratio: 1:2.08

Approx margin required: Rs 32,200

Rationale:

>> Long build up is seen in the IndiGo futures where we have seen 10 per cent rise in OI with price rising by 3.55 per cent.

>> Primary trend of the stock is positive as stock price is placed above its important short term and medium term moving averages.

 

>> Stock price has been forming bullish higher top higher bottom formation on the weekly charts.

>> Oscillators like RSI and MFI are in rising mode and placed above 60 on the daily chart, ndicating strength in the stock.

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

Disclaimer: Nandish Shah is Research Analyst (Technical and Derivative) at HDFC Securities. Views are his own.