Nandish Shah recommends a Bull Spread strategy on Motherson Sumi in F&O

The derivative analyst from HDFC Securities recommends this strategy based on the following four rationales

Bull spread Strategy on MOTHERSON SUMI

Buy MOTHERSON SUMI OCT 240 CALL at Rs 10.6 & simultaneously sell 260 CALL at Rs 4.8
Lot Size 3500
Cost of the strategy Rs 5.8 (Rs 20,300 per strategy)
Maximum profit Rs 49,700 If Motherson sumi closes at or above 260 on 28 Oct expiry

Breakeven Point Rs 245.8

Rationale:

• We have seen long build-up in the Motherson Sumi Futures, where we have seen 6% rise (Prov) in the Open Interest with price rising by 6%.
• The stock price has broken out from the downward slopping trendline, adjoining the highs of 02-June and 28-Sept 2021.
• RSI and MFI Oscillators are placed above 60 and sloping upwards, Indicating strength in the current uptrend.
• Plus DI is trading above Minus DI while ADX line has started slopping upwards, Indicating stock is likely to gather momentum in the coming days.