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Derivative Strategy
BULL SPREAD Strategy on CIPLA
Buy CIPLA (30-Sept Expiry) 1600 CALL at ₹48 & simultaneously sell 1640 CALL at ₹31
Lot Size 375
Cost of the strategy ₹17 (₹6,375 per strategy)
Maximum profit ₹8,625 If CIPLA closes at or above 1640 on 30 Sept expiry.
Breakeven Point ₹1,617
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Risk Reward Ratio 1: 1.35
Approx margin required ₹23,000
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Rationale
We have seen a long build up in Cipla stock. This is indicated by an increase in Open Interest (OI) of 7 per cent, with a 3 per cent rise in the price. Short term trend is positive as it is placed above its 5, 11 and 20 day EMA Stock price has broken out on the weekly chart with higher volumes. Momentum Indicators and Oscillators are showing strength in current uptrend.
Note : It is advisable to book profit in the strategy when ROI exceeds 20 per cent.
(Disclaimer: Nandish Shah is a senior technical/derivative analyst at HDFC Securities. Views expressed are his own.)
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