F&O strategy: Nandish Shah recommends Bear Spread on Nifty, AB Capital

Here's why Nandish Shah technical research analyst of HDFC Securities recommends a 'Bear Spread' strategy on Nifty and AB Capital

Derivative strategy

BEAR SPREAD STRATEGY ON NIFTY

• Buy NIFTY (28-July Expiry) 23,800 PUT at  ₹91 & simultaneously sell 23,600 PUT at  ₹37
• Lot Size 65
• Maximum profit  ₹9,490 If NIFTY closes at or below 23,600 on 28 July expiry.
• Maximum Loss  ₹3,510 If NIFTY closes at or above 23,800 on 28 July expiry.
• Breakeven Point  ₹2,3746
• Risk Reward Ratio 1: 2.70
• Approx margin required  ₹31,000

Rationale:

• Short build up is seen in the NIFTY Futures, where we have seen rise in Open interest along with 0.53 per cent price fall.
• Short term trend turned weak as NIFTY is placed below its important short-term moving averages.
• Call writing is seen at 24,000-24,100 levels.
• RSI Oscillator is in falling mode and placed below 50 on the daily chart.

 

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

BEAR SPREAD Strategy on AB CAPITAL

 

• Buy ABCAPTAL (28-July Expiry) 390 PUT at  ₹3.85 & simultaneously sell 380 PUT at  ₹1.15
• Lot Size 3100
• Maximum profit  ₹22,630 If AB CAPITAL closes at or below 380 on 28 July expiry.
• Maximum Loss  ₹8,730 If AB CAPITAL closes at or above 390 on 28 July Expiry.
• Breakeven Point  ₹: 387.3
• Risk Reward Ratio 1: 1.2.7
• Approx margin required  ₹43,000

Rationale:

• Short build up is seen in the AB CAPITAL Futures, where we have seen rise in Open interest along with 2.2% price fall.
• Short term trend turned weak as AB CAPTAIL is placed below its 5 and 11 day EMA.
• Stock price has broken down on the daily charts with higher volumes.
• RSI Oscillator is in falling mode and placed below 50 on the daily chart.

 

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

 

 

============================================= 

Disclaimer: Views and outlook shared belong to the respective brokerages/analysts and are not endorsed by Business Standard. Readers' discretion is advised.