Bull spread on SBI: Buy Call at Rs 850, says Nandish Shah of HDFC Sec

Derivatives strategy on SB: Long build up is seen in SBI Futures with 11 per cent rise in open interest

BULL SPREAD Strategy on SBI

Buy SBI (27-June Expiry) 850 CALL at Rs 30 & simultaneously sell 880

CALL at Rs 20

Lot Size 750

Cost of the strategy Rs 10 (Rs 7500 per strategy)

Maximum profit Rs 15000 If SBI closes at or above Rs 880 on 27 June expiry.

Break Even Point Rs 860

Risk Reward Ratio 1:2

Approx margin required Rs 21700

Rationale:

>> Long build up is seen in SBI Futures where we have seen 11 per cent (Prov) rise in open interest with price rising by 0.3 per cent.

>> Price rise is accompanied by the rise in the volume, suggesting strength in the uptrend.

 

>> Stock price has been forming bullish higher top higher bottom formation on the weekly charts.

>> RSI Oscillator is in rising mode and placed above 60 on the daily chart, indicating strength in the stock.

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Disclaimer: Nandish Shah is a senior technical/derivative analyst at HDFC Securities. Views expressed are his own.