F&O Strategy: Nandish Shah recommends Bull Spread on Hero MotoCorp

The derivative analyst from HDFC Securities recommends buying Hero MotoCorp 2750 Call and simultaneously selling 2800 Call of the November series.

Derivative Strategy

Bull Spread Strategy on Hero MotoCorp

Buy HEROMOTO CORP (24-Nov Expiry) 2750 Call at Rs 30 & simultaneously sell 2800 Call at Rs 18.5

Lot Size 300

Cost of the strategy Rs 11.5 (Rs 3,450 per strategy)

Maximum profit Rs 11,550; If Hero Moto Corp closes at or above Rs 2,800 on 24-Nov expiry.

Breakeven Point Rs 2,762

Approx margin required Rs 32,000

Rationale:

• We have seen long build up in the futures on Thursday, where we have seen 5 per cent addition (Prov) in Open Interest with price rising by 2 per cent.
   
• The stock price has broken out on the daily chart where it closed