Persistent Systems: 4 reasons why a Bull Spread in F&O should work here

Buy Persistent 5100 Call option and simultaneously Sell 5300 Call of the August, recommends Nandish Shah, Sr. derivatives & technical research analyst of HDFC Securities.

Derivative Strategy

Buy PERSISTENT (31-Aug Expiry) 5100 CALL at Rs 104 & simultaneously sell 5300 CALL at Rs 33

Lot Size 175

Cost of the strategy Rs 71 (Rs 12,425 per strategy)

Maximum profit Rs 22,575; If PERSISTENT closes at or above Rs 5300 on 31 August expiry.

Breakeven Point Rs 5,171

Risk Reward Ratio 1:1.82

Approx margin required Rs 31,300

Rationale:

• Long build up is seen in the Persistent Futures on Thursday where Open Interest rose by 10 per cent (Prov) with the stock rising by 2.29 per cent.
   
• The stock price has broken out from the downward sloping trendline, adjoining the highs of 05-June and 20-July 2023.
   
• The stock price has been forming bullish higher top higher bottom formation on the weekly chart.
   
• Momentum Oscillators like RSI and MFI are sloping upwards and placed above 60 on the daily chart, indicting strength in the stock.

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

 

Disclaimer: Nandish Shah is Sr. Derivatives & Technical Research Analyst at HDFC Securities. He doesn't hold any position in the stock. Views are personal.