F&O cues: Analyst suggests Bear Spread for ICICI General Insurance stock

F&O stocks: ICICI General Insurance stock has seen a short build-up and has broken down on the daily chart with higher volumes

Derivative Strategy

BEAR SPREAD Strategy on ICICI Lombard General Insurance

Buy ICICIGI (31-July Expiry) 1,900 PUT at ₹18.6 & simultaneously sell 1,880 PUT at ₹11.4

 

Lot Size: 325

Cost of the strategy: ₹7.2 (₹2,340 per strategy)

Maximum profit ₹4,160 If ICICI General Insurance closes at or below 1880 on 31 July expiry.

Breakeven Point: ₹1,892.8

Risk Reward Ratio: 1:1.78

Approx margin required: ₹22,000

Rationale:

>> We have seen a short build-up in ICICI Lombard General Insurance stock. This is indicated by an increase in Open Interest (OI) of 3 per cent, with a 2 per cent decline in the price.

 

>> Short term trend is weak as it is placed below its 5, 11 and 20 day EMA

>> Stock price has broken down on the daily chart with higher volumes.

>> Momentum Indicators and Oscillators are showing weakness in stock.

 

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 at HDFC Securities. Views expressed are his own.)