F&O strategy: HDFC Securities recommends Bear Spread on Bank Nifty

Nandish Shah of HDFC Securities recommends to Buy Bank Nifty 47,000 PUT and simultaneously Sell 46,600 PUT for the April expiry.

Derivative Strategy

BEAR SPREAD Strategy on BANK NIFTY

Buy BANK NIFTY (24-Apr Expiry) 47,000 PUT at Rs 333 & simultaneously sell 46,600 PUT at Rs 200

Lot Size 15

Cost of the strategy Rs 133 (Rs 1,995 per strategy)

Maximum profit Rs 4,005; If BANK NIFTY closes at or below Rs 46,600 on 24 April expiry.

Breakeven Point: Rs 46,867

Risk Reward Ratio: 1:2

Approx margin required: Rs 14,100

Rationale:

• Short build up is seen in the BANK NIFTY Futures, where Open Interest rose by 10 per cent (Prov) with Bank Nifty falling by 0.87 per cent.
   
• Short term trend of the Bank Nifty is weak as it has placed below its 11 and 20-day EMA.
   
• Momentum indicators and oscillators are sloping downwards and placed around 40 on the daily chart, suggesting weakness in the Index.
   
• Amongst the BANK NIFTY options, Call writing is seen at 47,500-48,000 levels.

Note : It is advisable to book profit in the strategy when ROI exceeds 20%.

 

Disclaimer: Nandish Shah is Sr. Derivatives & Technical Research Analyst at HDFC Securities. He doesn't hold any position in the stock. Views are personal.