Nandish Shah of HDFC Securities recommends Bull Spread on Bank Nifty

Bank Nifty May F&O expiry strategy: Buy BANK NIFTY (29-May Expiry) 48,900 CALL at Rs 376 & simultaneously sell 49,400 CALL at Rs 174

BULL SPREAD Strategy on BANK NIFTY
 

Buy BANK NIFTY (29-May Expiry) 48,900 CALL at Rs 376 & simultaneously sell 49,400 CALL at Rs 174

Lot Size: 15
 

Cost of the strategy: Rs 202 (Rs 3030 per strategy)
 

Maximum profit: Rs 4,470 If BANK NIFTY closes at or above 49,400 on May 29-expiry
 

Breakeven Point: 49,102
 

Risk Reward Ratio: 1:48
 

Approx margin required:  Rs 15,000

Rationale:

>> Long build up is seen in the BANK NIFTY Futures, where Open Interest rose by 1 per cent (Prov) with BANK NIFTY rising by 2.05 per cent.
 

 

>> The short-term trend turned positive as BANK NIFTY has closed above its 5,11 and 20-day EMA.

>> RSI Oscillator is sloping upwards and placed near 50 on the daily chart, suggesting strength in the current up move.

>> Amongst the BANK NIFTY options, Put writing is seen at 48,500-48,000 levels.
 

>> FIIs long to short ratio in the Index Futures stands at an oversold level of 0.45 levels(Wednesday) which in-turn suggest higher possibility of a short covering by them in the coming days.

Note : It is advisable to book profit in the strategy when ROI exceeds 20 per cent.

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Disclaimer: Nandish Shah is senior technical/derivative analyst at HDFC Securities. The analyst may/may not hold position in the security. Views expressed are his own.