 "Nandish Shah of HDFC Securities suggests Bull Spread strategy on Lupin")
Derivative Strategy
BULL SPREAD Strategy on LUPIN
Buy LUPIN (26-Dec Expiry) Rs 2,140 CALL at Rs 44 & simultaneously sell
Rs 2,200 CALL at Rs 22
- Lot Size 425
- Cost of the strategy Rs 22 (Rs 9,350 per strategy)
- Maximum profit Rs 16,150 If LUPIN closes at or above Rs 2,200 on 26 Dec expiry.
- Breakeven Point Rs 2,162
- Risk Reward Ratio 1:73
- Approx margin required Rs 32,000
Rationale:
- Long build up is seen in the Lupin Futures, where we have seen 2 per cent rise in the open interest with price rising by 1 per cent.
- Stock price has broken out from the downward sloping trendline, adjoining the highs of October 10 and November 4, 2024.
- Primary trend of the Lupin is positive as stock price is placed above its 200 day EMA.
- Momentum Oscillators like RSI and MFI is in rising mode and placed near 60 on the daily chart, indicating strength in the current uptrend.
Note : It is advisable to book profit in the strategy when ROI exceeds 20 per cent. (This article is by Nandish Shah, senior technical/derivative analyst at HDFC Securities. Views expressed are his own.)