Nandish Shah of HDFC Sec suggests Bear Spread on Nifty; key levels here

Nifty trading strategy: Short term trend of the Nifty remains weak as it is placed above its 11 and 20 day EMA.

Derivative Strategy - Nandish Shah, HDFC Securities

BEAR SPREAD Strategy on NIFTY

1) Buy Nifty (30-December Expiry) 25800 Put at ₹127 & simultaneously sell 25600 Put at ₹65

 

Lot Size 75 

Maximum Loss ₹4650 If Nifty closes at or above 25800 on 30 Dec expiry.

  Maximum profit ₹10350 If Nifty closes at or below 25600 on 30 Dec expiry.

  Breakeven Point ₹25738

  Risk Reward Ratio 1: 2.23

  Approx margin required ₹39000

Rationale:

 

Short build up is seen in the Nifty Futures during the week, where Open interest rose by 7 per cent along with price fall of 0.9 per cent.

 

  Short term trend of the Nifty remains weak as it is placed above its 11 and 20 day EMA.

 

Nifty has been forming bearish higher top higher bottom formation on the daily chart. 

Nifty open interest put call ratio fell to 0.83 levels from 1.15 levels on the back of call writing at 25800-26000 levels. 

 

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.)