F&O Cues: Analyst suggests 'Bull Spread' on Bank Nifty, BDL; check details

Nandish Shah of HDFC Securities has shared Bull Spread' on strategy on Bank Nifty and Bharat Dynamics

Derivative Strategy by Nandish Shah of HDFC Securities

1) BULL SPREAD STRATEGY ON BANK NIFTY

- Buy BANK NIFTY (26-May Expiry) 56,500 Call at ₹824 & simultaneously sell 57,000 CALL at ₹597

- Lot Size 30

- Maximum profit ₹8,190 if BANK NIFTY closes at or above 57,000 on 26 May expiry.

- Maximum Loss ₹6,810 if BANK NIFTY closes at or below 56,500 on 26 May expiry.

- Breakeven Point ₹56,727

- Risk Reward Ratio 1:1.2

- Approx margin required ₹34,000

Rationale:

- Long build up is seen in the BANK NIFTY Futures during the May series till now, where Open interest rose by 20 per cent along with price rising more than 1.5 per cent.

 

- Short term trend remains up as BANK NIFTY is placed above its 5,11 and 20 day EMA.

- Amongst the options, put writing is seen at 56,000-55,500 levels.

- Momentum Indicator (RSI) is in rising mode and placed above 50, indicating strength in the current uptrend.

 

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

2) BULL SPREAD Strategy on Bharat Dynamics

- Buy BDL (26-May Expiry) 1,500 Call at ₹51 & simultaneously sell 1,560 Call at ₹29

- Lot Size 350

- Maximum profit ₹13,300 if BDL closes at or above 1560 on 26 May expiry.

- Maximum Loss ₹7,700 if BDL closes at or below 1,500 on 26 May expiry.

- Breakeven Point ₹1522

- Risk Reward Ratio 1:1.73

- Approx margin required ₹18,000

Rationale:

- Long build up is seen in the BDL Futures where we have seen rise in OI with price rising by 5.7 per cent.

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

- Primary trend turned positive as stock price closed above its 200-day EMA.

- Stock price has broken out on the daily 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.  ==========================  (Disclaimer: This article is written by Nandish Shah, senior technical/derivative analyst, HDFC Securities. View expressed are his own.)