F&O strategy: HDFC Securities suggests Bull Spread on L&T Finance

Nandish Shah of HDFC Securities recommends to buy L&T Finance 96 call option and simultaneously sell 100 call of the May series

Derivative Strategy

BULL SPREAD Strategy on L&T Finance

Buy L&T FIN (25-MAY Expiry) 96 CALL at Rs 2.80 & simultaneously sell 100 CALL at Rs 1.3

Lot Size: 8,924
Cost of the strategy: Rs 1.50 (Rs 13,386 per strategy)
Maximum profit: Rs 22,310 If L&T FINANCE closes at or above 100 on 25 May expiry.
Breakeven Point: Rs 97.5
Approx margin required: Rs 30,000

Rationale

• Seen long build up in L&T finance Future, with 5 per cent addition in Open Interest (Prov), and price rising by 3.2 per cent
   
• The stock price has broken out on the daily chart where it closed at the highest level since June 2021
   
• The stock price has been forming bullish higher top higher bottom formation on the weekly chart
   
• Oscillators and momentum indicators show strength in the current uptrend

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

 

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