F&O Strategy: Bear spread on Bank Nifty, suggests HDFC Securities

RSI has fallen below benchmark level of 50 for Bank Nifty, indicating a bearish trend, says Nandish Shah of HDFC Securities

Bear Spread Strategy on Bank Nifty (17-August expiry)

Buy Bank Nifty 44,500 PUT at Rs 217 & simultaneously sell 44,000 PUT at Rs 87

Lot Size: 15

Cost of the strategy: Rs 130 (Rs 1,950 per strategy)

Maximum profit: Rs 5,550 if Bank Nifty closes at or below Rs 44,000 on 17 August expiry.

Breakeven Point: Rs 44,370

Risk Reward Ratio: 1:2.85

Approx margin required: Rs 13,500

Rationale:

>> Short build up seen in Bank Nifty Futures on Thursday where Open Interest rose by 12 per cent (Prov) with Bank nifty falling by 0.76 per cent

>> Short term trend of the Bank Nifty is weak as it is trading below its 5,11 and 20-day EMA

>> RSI has fallen below benchmark level of 50, indicating a bearish trend

 

>> Amongst the Bank Nifty options, call writing is seen at 44,500-45,000 levels.

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

Disclaimer: Nandish Shah is Sr. Derivatives & Technical Research Analyst at HDFC Securities. He doesn't hold any position in the stock/index. Views are personal.