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

Bear Spread Strategy on Bank Nifty (31-August expiry)

Buy Bank Nifty 44,200 PUT at Rs 282 & simultaneously sell 43,700 PUT at Rs 120

Lot Size: 15

Cost of the strategy: Rs 162 (Rs 2,430 per strategy)

Maximum profit: Rs 5,070 if Bank Nifty closes at or below Rs 43,700 on 7 Sept expiry

Breakeven point: Rs 44,038

Risk Reward Ratio: 1:2.09

Approx margin required: Rs 13,500

Rationale

>> Short rollover seen in Bank Nifty Futures on Thursday where Open Interest rose by 43 per cent (Prov) with Bank Nifty falling by 0.55 per cent

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

 

>> Momentum Oscillators- RSI (11) has fallen below benchmark level of 50, which indicates bearish trend

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