F&O Trade: Analyst suggests bear spread on Nifty for March 30; check levels

Short build up is seen in the Nifty Futures, where Open interest rose by 3 per cent along with price fall of 1 per cent, said Nandish Shah, technical research analyst at HDFC Securities

Derivative Strategy by Nandish Shah, HDFC Securities

Bull Spread Strategy on National Aluminum

Buy National Aluminium (30-March Expiry) 420 CALL at ₹11 & simultaneously sell 430 CALL at ₹8

Lot Size: 3750

Cost of the strategy: ₹3 (₹11250 per strategy)

Maximum profit: ₹26,250 if National Aluminium closes at or above 430 on 30 March expiry.

Breakeven Point: ₹423

Risk Reward Ratio: 1:2.33

Approx margin required: ₹54,000

Rationale:

• Long build up is seen in the NATIONAL ALUMINIUM Futures where we have seen rise in OI with price rising by 2.5 per cent.
• Primary trend of the Nalco stock is positive as it is placed above its important moving averages.
• Stock price has been forming bullish higher top higher bottom formation on the daily and weekly charts.
• Momentum Indicators and Oscillators are showing strength in current uptrend.

Bear Spread Strategy on Nifty

Buy NIFTY (30-March Expiry) 23600 PUT at ₹402 & simultaneously sell 23,400 PUT at ₹345 

Lot Size: 65

Maximum profit: ₹9,295 if NIFTY closes at or below 23,400 on 30 March expiry.

Maximum Loss: ₹3,705 If NIFTY closes at or above 23,600 on 30 March expiry.

Breakeven Point: ₹23,543

Risk Reward Ratio: 1:2.51

Approx margin required: ₹31,000

Rationale:

• Short build up is seen in the Nifty Futures, where Open interest rose by 3 per cent along with price fall of 1 per cent.
• Aggressive short build up is seen in the Nifty Futures during the March series till now, where we have seen 55 per cent rise in OI with price falling by 7 per cent
• Short term trend for the Nifty remains weak as it is placed below its 5,11 and 20 day EMA.
• RSI Oscillator is in falling mode and placed below 40, suggesting strength in the downtrend.

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