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

F&O strategy: Primary trend of the Bank Nifty remains positive as it is placed above its 50 and 100 day EMA

Derivative Strategy

BULL SPREAD Strategy on BANK NIFTY

• Buy BANKNIFTY (31-July Expiry) 57,500 CALL at ₹497 and simultaneously sell 58,000 CALL at ₹319
• Lot Size: 35
• Cost of the strategy ₹178 (₹6,230 per strategy)
• Maximum profit ₹11,270 If BANK NIFTY closes at or above 58,000 on 31 July expiry.
• Breakeven Point ₹57,678
• Risk Reward Ratio 1:1.81
• Approx margin required ₹40,000

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Rationale:

• Primary trend of the Bank Nifty remains positive as it is placed above its 50 and 100 day EMA
• Short term trend of the Index is positive as it is placed above its 20 day EMA
• It has been forming bullish higher top higher bottom formation on the weekly chart.
• Put writing is seen at 56,500-57,000 levels.
• FIIS long to short ratio in the Index Futures stands near oversold level, suggesting higher possibility of a short covering by them in the coming days.

BULL SPREAD Strategy on PFC

• Buy PFC (31-July Expiry) 430 CALL at ₹12 and simultaneously sell 450
• CALL at ₹4.80
• Lot Size 1,300
• Cost of strategy ₹7.2 (₹9,360 per strategy)
• Maximum profit ₹16,640 If PFC closes at or above ₹450 on 31 July expiry.
• Breakeven Point ₹437.2
• Risk Reward Ratio 1:1.78
• Approx margin required ₹19,500

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Rationale:

• Long build up is seen in the PFC Futures, where we have seen 6 per cent rise in open interest with price rising by 2.80 per cent.
• Short term trend remains positive, as the stock price is placed above its 5, 11 and 20 day EMA.
• Primary trend turned positive as stock price closed above its 200 day EMA.
• Oscillators like RSI and MFI are in rising mode and placed above 60 on the daily chart, indicating strength in the current uptrend.