F&O strategy: Bull spread on Bank Nifty for the weekly expiry

Nandish Shah of HDFC Securities recommends to Buy Bank Nifty 45000 PUT and simultaneously sell 44500 PUT of the 14-Feb expiry.

Derivative Strategy

BEAR SPREAD Strategy on BANK NIFTY

Buy BANK NIFTY (14-Feb Expiry) 45000 PUT at Rs 380 & simultaneously sell 44500 PUT at Rs 200.75

Lot Size 15

Cost of the strategy Rs 179.25 (Rs 2,689 per strategy)

Maximum profit Rs 4,811; If BANK NIFTY closes at or below 44500 on 14-Feb expiry.

Breakeven Point 44,820

Risk Reward Ratio 1:1.79

Approx margin required Rs 13,500

Rationale:

• Short build up is seen in the BANK NIFTY Futures, where Open Interest rose by 7 per cent with Bank Nifty falling by 1.76 per cent.
   
• Short term trend of the Bank Nifty is weak as it has placed below its 5,11 and 20-day EMA.
   
• Bank Nifty is on verge of breaking down from the upward sloping trendline, adjoining the lows of 26-Oct and 24-January 2024.
   
• Amongst the BANK NIFTY weekly options, Call writing is seen at 45000-45500 levels.

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

 

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