F&O strategy: HDFC Securities recommends Bear Spread on Bank Nifty

Nandish Shah of HDFC Securities recommends to Buy Bank Nifty 47,500 Put at Rs 546 and simultaneously sell 47,000 put at Rs 360 for May 22 Expiry

Derivative Strategy

BEAR STRATEGY on Bank Nifty

Buy Bank Nifty (May 22 Expiry) 47,500 Put at Rs 546 & simultaneously sell 47,000 Put at Rs 360 

Lot Size 15

Cost of the strategy Rs 186 (Rs 2,790 per strategy)

Maximum profit Rs 4,710 If Bank Nifty closes at or below Rs 47,000 on 22 May expiry.

Breakeven Point Rs 47,314

Risk Reward Ratio 1:69

Approx margin required Rs 14,200

Rationale

Short build up is seen in the Bank NiftyFutures, where Open Interest rose by 12 per cent(Prov) with Bank Nifty falling by 1.10 per cent.

Bank Nifty has broken down from the upward sloping trendline on the daily line chart, adjoining the lows of 12-Feb and 18-April 2024

 

The short term trend of the Bank Nifty is weak as it has placed below its 11 and 20-day EMA.

Momentum Indicators and Oscillators are sloping downwards and placed below 40 on the daily chart, suggesting weakness in the Index.

Amongst the Bank Nifty options, Call writing is seen at 47,500-48,000 levels.

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

(Nandish Shah is a senior technical/derivative analyst at HDFC Securities. Views expressed are his own.)