 "Options Trading: HDFC Securities recommends Bull Spread on ONGC")
Derivative Strategy
BULL SPREAD Strategy on ONGC
Buy ONGC (28-Sept Expiry) 190 CALL at Rs 2.40 & simultaneously sell 195 CALL at Rs 1.30
Lot Size: 3,850
Cost of the strategy: Rs 1.10 (Rs 4,235 per strategy)
Maximum profit: Rs 15015; If ONGC closes at or above Rs 195 on 28 Sept expiry.
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Breakeven Point: Rs 191.5
Risk Reward Ratio: 1:3.55
Approx margin required: Rs 25,300
Rationale:
- Long build up is seen in the ONGC Futures on Thursday where Open Interest surged by 17 per cent (Prov) with price rising by 2.2 per cent.
- Stock price has broken out on the daily and weekly chart to close at five year high.
- Stock price has been forming bullish higher top higher bottom candlestick pattern on the weekly and monthly chart.
- Oscillators like RSI(11) and MFI(10) are slopping upwards and placed above 60 on the daily and weekly 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.