F&O Strategy: Bull Spread trades on Nifty Midcap, Biocon explained

Analyst at HDFC Securities have recommended a 'Bear Spread' Strategy on the Nifty MidCap index as it has broken out from the downward sloping trendline on the weekly charts

Bull Spread strategy on MIDCP NIFTY

Buy MIDCP NIFTY (31-July Expiry) 13,500 Call at ₹261 and simultaneously sell 13,700 Call at ₹165

Lot size: 140

Cost of the strategy: ₹96 (₹13,440 per strategy)

Maximum profit: ₹14,560, if MIDCP NIFTY closes at or above 13,700 on 31 July expiry.

Breakeven point: ₹13,596

Risk reward ratio: 1: 1.10

Approx margin required: ₹38,000

 

Rationale:

• Long build-up is seen in the MIDCP NIFTY futures during the series till now, where open interest has risen by 3 per cent, with it rising by 1 per cent.
• The primary trend of the MIDCP NIFTY is positive as it is placed above its 50 and 100-day EMAs.
• It has been forming a bullish higher top, higher bottom formation on the daily chart.
• It has broken out from the downward sloping trendline on the weekly charts.
• The short-term trend of the index is positive as it is placed above its 5,11, and 20-day EMAs.

 

Bull Spread strategy on Biocon

Buy Biocon (31-July Expiry) 380 Call at ₹9.4 and simultaneously sell 390 Call at ₹5.9

Lot size: 2500

Cost of strategy: ₹3.5 (₹8750 per strategy)

Maximum profit: ₹16,250, if Bioson closes at or above ₹390 on 31 July expiry.

Breakeven point: ₹383.5

Risk reward ratio: 1:1.86

Approx margin required: ₹33,000

 

Rationale:

 

• Long build-up is seen in the Biocon Futures during the July series till now, where we have seen a 5 per cent rise in open interest with price rising by 7 per cent.
• Short-term trend remains positive, as the Biocon stock price is placed above its 5,11 and 20 day EMAs.
• The stock price has been forming a bullish higher top, higher bottom formation on the daily chart.
• RSI and MFI oscillators are in rising mode and placed above 60 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. 

 

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