F&O Strategy: HDFC Securities recommends Bull Spread on Canara Bank

Nandish Shah recommends to Buy Canara Bank 290 Call option and simultaneously Sell 300 Call of the April series.

Derivative Strategy

BULL SPREAD Strategy on CANARA BANK

Buy CANBANK (27-April Expiry) 290 CALL at Rs 7.20 & simultaneously sell 300 CALL at Rs 3.40

Lot Size: 2,700

Cost of the strategy: Rs 3.80 (Rs 10,260 per strategy)

Maximum profit Rs 16,740; if Canara bank closes at or above Rs 300 on 27 April expiry.

Breakeven Point Rs 293.8

Approx margin required: Rs 27500

Rationale:

• We have seen long build up in the Canara Bank future, where we have seen 6 per cent addition in Open Interest with price rising by 3.6 per cent.
   
• The stock price has broken out on the daily chart to close at highest level since 10-March.
   
• The stock has been taking support at 200-day EMA.
   
• RSI oscillator is placed above 50 and rising upwards on the daily chart, indicating strength in the current uptrend.

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

 

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