Short rollover seen in Nifty Futures; Check Bear Spread strategy for index

Bear Spread Strategy on Nifty
 

Buy Nifty (November 9 expiry) 18,800 PUT at Rs 139.9 and simultaneously sell 18,500 PUT at Rs 62.55

Lot Size: 50

Cost of the strategy: Rs 77.35 (Rs 3,868 per strategy)

Maximum profit Rs 11,132 if Nifty closes at or below Rs 18,500 on November 9 expiry.

Breakeven Point: Rs 18,722

Risk Reward Ratio: 1:2.88

Approx margin required: Rs 19,000

Rationale:

>> Short rollover is seen in the Nifty Futures to the November series, where open interest rose by 14 per cent on Thursday with Nifty falling 1.39 per cent.

>> Nifty has broken down from the upward sloping trendline, adjoining the lows of August 31 and October 4. 

>> Short term trend of the Nifty is weak as it is placed below its 5,11 and 20-day EMA.

>> Amongst the Nifty options, aggressive Call writing is seen at 19,000-19,200 levels.

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

Disclaimer: Nandish Shah is Senior Derivative & Technical Analyst, HDFC Securities. Views expressed are own. He does not hold any position in the index.