 "Indigo")
Bull Spread Strategy on IndiGo
Buy IndiGo Feb 29 expiry 3100 CALL at Rs 123 and simultaneously sell 3300 CALL at Rs 58
Lot Size: 300
Cost of the strategy: Rs 65 (Rs 19,500 per strategy)
Maximum profit: Rs 40,500 if IndiGo closes at or above Rs 3,300 on Feb 29 expiry.
Breakeven Point: Rs 3,165
Risk Reward Ratio: 1:2.08
Approx margin required: Rs 32,200
Rationale:
>> Long build up is seen in the IndiGo futures where we have seen 10 per cent rise in OI with price rising by 3.55 per cent.
>> Primary trend of the stock is positive as stock price is placed above its important short term and medium term moving averages.
>> Stock price has been forming bullish higher top higher bottom formation on the weekly charts.
>> Oscillators like RSI and MFI are in rising mode and placed above 60 on the daily chart, ndicating strength in the stock.
Note: It is advisable to book profit in the strategy when ROI exceeds 20 per cent.
Disclaimer: Nandish Shah is Research Analyst (Technical and Derivative) at HDFC Securities. Views are his own.
