Bull Spread strategy for Lupin Jan expiry amid long build-up in futures

Oscillators like RSI and MFI are in rising mode and placed above 60 on the weekly chart, indicating strength in Lupin's share, said Nandish Shah

Bull Spread Strategy on Lupin

Buy Lupin Jan 25 expiry 1450 Call at Rs 17.2 and simultaneously sell 1500 Call at Rs 6.75

Lot size: 850

Cost of the strategy: Rs 10.45 (Rs 8,882 per strategy)

Maximum profit: Rs 33,618 if Lupin closes at or above Rs 1,500 on 25 Jan expiry.

Breakeven point: Rs 1,461

Risk Reward Ratio: 1:3.78

Approx margin required: Rs 42,500

Rationale:

>> Long build up is seen in Lupin Futures Thursday where Open Interest rose 4.5 per cent (Prov) with stock rising 1.85 per cent.

>> Stock price has broken out on the daily chart where it closed at all time high levels.

 

>> Stock price has been forming bullish higher top higher bottom formation on the daily chart.

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

>> Pharma as a sector looking strong on the short and medium term charts.

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), HDFC Securities. He does not hold any positions in the above mentioned stock. Views are his own.