F&O strategy: Bull spread on Vedanta; recommends HDFC Securities

Nandish Shah of HDFC Securities recommends to Buy Vedanta 280 CALL and simultaneously sell 290 CALL of the January series.

Derivative Strategy

BULL SPREAD Strategy on Vedanta

Buy Vedanta (25-Jan expiry) 280 CALL at Rs 6.20 & simultaneously sell 290 Call at Rs 3.10

Lot Size 2,300

Cost of the strategy Rs 3.10 (Rs 7,130 per strategy)

Maximum profit Rs 15,870; If Vedanta closes at or above Rs 290 on 25-Jan expiry.

Breakeven Point: Rs 283.10 

Risk Reward Ratio: 1:2.23

Approx margin required: Rs 22,200

Rationale:

• Long build up is seen in Vedanta Futures on Thursday where Open Interest rose by 5 per cent (prov) with it rising by 2.83 per cent.
   
• The stock price has broken out on the daily chart where it closes at highest level since 01-August 2023.
   
• The stock price has broken on the weekly chart from the downward sloping trendline, adjoining the highs of week ending 13-April 2022 and 20-Jan 2023.
   
• Oscillator like RSI and MFI are in rising and placed above 60 on the weekly chart, indicating strength in the stock.

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.