F&O picks: ONGC shows positive trend; adopt bull spread: Nandish Shah

Nandish Shah of HDFC Securities suggests Oil and Natural Gas Corporation (ONGC) bull call spread for March 30 expiry. Check cost, max profit, breakeven, margin, and technical rationale here

Bull Spread Strategy on Oil and Natural Gas Corporation (ONGC) 

Buy ONGC (30-March Expiry) 285 CALL at ₹6.7 and simultaneously sell 300 CALL at ₹2.7 

• Lot size: 2250 
• Cost of the strategy: ₹4 (₹9,000 per strategy) 
• Maximum profit: ₹24,750 if ONGC closes at or above ₹300 on 30-March expiry 
• Breakeven Point: ₹289 
• Risk Reward Ratio: 1: 2.75 
• Approx margin required: ₹22,000 

Rationale:

A long build-up is seen in the ONGC Futures, where we have seen a sharp rise in open interest (OI) with price rising by 1 per cent.

• Oil and Natural Gas Corporation stock price has broken out on the weekly chart with higher volumes. 
• Primary trend of the ONGC stock is positive as it is placed above its important moving averages. 
• Momentum Indicators and Oscillators are showing strength in the current uptrend. 
•  In the option segment, Put writing is seen at ₹275-₹280 levels.

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

 

Disclaimer: This article is by Nandish Shah, senior technical/derivative analyst, HDFC Securities. View expressed are his own.