Nandish Shah of HDFC Securities recommends Bull Spread on Nifty; details

Derivative Strategy

BULL SPREAD Strategy on NIFTY

Buy Nifty (September 5 Expiry) 25,200 Call at Rs 140 & simultaneously sell 25,500 Call at Rs 30

Lot Size: 25

Cost of the strategy: Rs 110 (Rs 2,750 per strategy)

Maximum profit: Rs 4,750 If Nifty closes at or above Rs 25,500 on 05 September expiry.

Breakeven Point: Rs 25310

Risk Reward Ratio: 1: 1:73

Approx margin required: Rs 12,600

Rationale:

-- Long rollover is seen in the Nifty Futures, where we have seen sharp rise in the

open interest with Nifty rising by 0.40 per cent to close at yet another new all time high.

-- Short term trend of the Nifty remains bullish as it is placed above its 5, 11 and 20

 

day EMA.

-- Momentum Indicators and Oscillators are in rising mode and placed above 50 on

the daily chart, indicating bullish trend.

-- Amongst the Nifty options, Put writing is seen at 25,000-25,100 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.)