Derivative analyst Nandish Shah advises a Bull spread strategy on BANKNIFTY

The derivative analyst from HDFC Securities recommends buying January 38,000 Call and selling 38,500 Call of the Bank Nifty based on the following four rationales.

Bull spread Strategy on BANKNIFTY

Buy BANKNIFTY (27-JAN EXPIRY) 38,000 CALL at Rs 422 & simultaneously sell 38,500 CALL at Rs 222
Lot Size 25

Cost of the strategy Rs 200 (Rs 5,000 per strategy)

Maximum profit Rs 7,500 If Bank Nifty closes at or above 38,500 on 27 Jan expiry.

Breakeven Point Rs 38,200

Rationales:

• We have seen short covering in the Bank Nifty Futures during the January series till now, where we have seen 7% fall in the Open Interest with Bank Nifty rising by 8%.
• Short term trend is bullish as Bank Nifty