 "Lupin Pharma")
Bull Spread Strategy on Lupin
Buy Lupin Jan 25 expiry 1450 Call at Rs 17.2 and simultaneously sell 1500 Call at Rs 6.75
Lot size: 850
Cost of the strategy: Rs 10.45 (Rs 8,882 per strategy)
Maximum profit: Rs 33,618 if Lupin closes at or above Rs 1,500 on 25 Jan expiry.
Breakeven point: Rs 1,461
Risk Reward Ratio: 1:3.78
Approx margin required: Rs 42,500
Rationale:
>> Long build up is seen in Lupin Futures Thursday where Open Interest rose 4.5 per cent (Prov) with stock rising 1.85 per cent.
>> Stock price has broken out on the daily chart where it closed at all time high levels.
>> Stock price has been forming bullish higher top higher bottom formation on the daily chart.
>> Oscillators like RSI and MFI are in rising mode and placed above 60 on the weekly chart, indicating strength in the stock.
>> Pharma as a sector looking strong on the short and medium term charts.
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), HDFC Securities. He does not hold any positions in the above mentioned stock. Views are his own.
