F&O Strategy: Bull Spread on NMDC for Nov expiry

Nandish Shah of HDFC Securities recommends to Buy NMDC 160 CALL and simultaneously sell 170 CALL of the November series.

Derivatives Trading

BULL SPREAD Strategy on NMDC

Buy NMDC (30-Nov Expiry) 160 CALL at Rs 5.3 & simultaneously sell 170 CALL at Rs 2.05

Lot Size 4500

Cost of the strategy Rs 3.25 (Rs 14,625 per strategy)

Maximum profit Rs 30,375; If NMDC closes at or above Rs 170 on 30-Nov expiry.

Breakeven Point Rs 163.25

Risk Reward Ratio 1:2.08

Approx margin required Rs 25,000

Rationale:

- Long build up is seen in the NMDC Futures on Thursday where Open Interest rose by 1 per cent (Prov) with it rising by 4 per cent.

- Short term trend of the stock turned positive as stock price is placed above its important short-term moving averages.

 

- RSI and MFI Oscillator is in rising mode and placed above 50 on the weekly chart, Indicating strength in the stock.

- Metal as a sector looking good on the short-term charts.

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.