Nandish Shah of HDFC Sec suggests 'Bull Spread' play for Bank Nifty today

Derivative Strategy  BULL SPREAD Strategy on BANK NIFTY

 

• Buy BANK NIFTY (30-Jan Expiry) 52,000 CALL at Rs 795 & simultaneously sell 52,500 CALL at Rs 570
• Lot Size 15
• Cost of the strategy Rs 225 (Rs 3375 per strategy)
• Maximum profit Rs 4,125 If BANK NIFTY closes at or above Rs 52,500 on 30 Jan expiry.
• Breakeven Point Rs 52,225
• Risk Reward Ratio 1: 1.22
• Approx margin required Rs 15,500

 

Rationale:

• Long build up is seen in the Bank nifty futures where we have seen 3 per cent rise in the open interest with it rising by 1.07 per cent.
• Short term trend turned positive as it has closed above its 5 and 11 day EMA.
• Bank Nifty took support at 200 day EMA and reversed northwards.
• FIIs long to short ratio in the Index Futures stands at an oversold levels of 0.16 levels, indicating higher probability of short covering by them in the days to come.
• Amongst the BANK NIFTY options, Put writing is seen at 51000-51500 levels.

(This article is by  Nandish Shah, senior technical/derivative analyst at HDFC Securities. View expressed are his own.)