 "F&O strategy: HDFC Securities recommends Bear Spread on Bank Nifty")
Derivative Strategy
BEAR SPREAD Strategy on BANK NIFTY
Buy BANK NIFTY (24-Apr Expiry) 47,000 PUT at Rs 333 & simultaneously sell 46,600 PUT at Rs 200
Lot Size 15
Cost of the strategy Rs 133 (Rs 1,995 per strategy)
Maximum profit Rs 4,005; If BANK NIFTY closes at or below Rs 46,600 on 24 April expiry.
Also Read
Breakeven Point: Rs 46,867
Risk Reward Ratio: 1:2
Approx margin required: Rs 14,100
Rationale:
- Short build up is seen in the BANK NIFTY Futures, where Open Interest rose by 10 per cent (Prov) with Bank Nifty falling by 0.87 per cent.
- Short term trend of the Bank Nifty is weak as it has placed below its 11 and 20-day EMA.
- Momentum indicators and oscillators are sloping downwards and placed around 40 on the daily chart, suggesting weakness in the Index.
- Amongst the BANK NIFTY options, Call writing is seen at 47,500-48,000 levels.
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.