F&O Strategy: HDFC Sec suggests Bull Spread on Chambal Fertilisers shares

Stock Market Today: Chambal Fertilisers share price has broken out on the daily and weekly chart to close at an all-time high level

BULL SPREAD Strategy on CHAMBAL FERTILISERS

Buy CHAMBAL FERT (27-FEB Expiry) 560 CALL at Rs 10.9 & simultaneously sell 580 CALL at Rs 4.2

 

Lot Size: 1,900

 

Cost of strategy: Rs 6.70 (Rs 12,730 per strategy)

 

Maximum profit: Rs 25,270 if Chambal Fertilsiers Chemicals closes at or above Rs 580 on Feb 27 expiry

 

Breakeven Point: Rs 566.7

 

Risk Reward Ratio: 1:2

 

Approx margin required: Rs 93,500

 

Rationale:

 

>> Long build up is seen in the Chambal Fertilisers Futures, where we have seen 22 per cent rise in the Open Interest. Chambal Fertiliser share price, meanwhile, rose 4 per cent on Thursday.

 

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>> Chambal Fertilisers stock price has broken out on the daily and weekly chart to close at an all-time high level.

 

>> Chambal Fertilisers share has formed strong base by taking support at 200-day EMA in multiple times during the last one year.

 

>> Momentum Oscillators like RSI and MFI are in rising mode and placed above 50 on the daily chart, indicating strength in the current uptrend.

 

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

   

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Disclaimer: This article is by Nandish Shah, senior technical/derivative analyst at HDFC Securities. Views expressed are his own.