Trading Strategy: Here's how to trade Nifty Bank on Friday, April 4

Long build up is seen in the Bank Nifty futures, where we have seen 5 per cent(Prov) rise in open interest with it rising by 0.49 per cent, said Nandish Shah of HDFC Securities

Derivative Strategy

 

Bull Spread Strategy on Bank Nifty

  1) Buy Bank Nifty (24-April Expiry) 52000 Call at Rs 623 & simultaneously sell 52500 Call at Rs 410

 

Lot Size 30

 

Cost of the strategy Rs 213 (Rs 6,390 per strategy)

 

Maximum profit Rs 8610 If Bank Nifty closes at or above 52500 on 24 April expiry.

 

Breakeven Point Rs 52213

 

Risk Reward Ratio 1: 1.35

 

Approx margin required Rs 31000  ALSO READ | Sahaj Agrawal of Kotak Sec suggests how to trade Nifty50 on Apr 4; details

 

Rationale

 

-- Long build up is seen in the Bank Nifty futures, where we have seen 5 per cent (Prov) rise in open interest with it rising by 0.49 per cent.

 

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-- Short term trend of the Index is positive as it is placed above its 5,11 and 20 day EMA

 

-- Index has broken out from the downward sloping trendline on the daily charts.

 

-- Bank Nifty Put Call ratio has moved up to 1.02 levels on the back of aggressive Put writing at 51000-51500 levels.  ALSO READ | Union Bank, Jubilant FoodWorks among top bets by Ruchit Jain of MOFSL today

 

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.)