Nandish Shah of HDFC Securities recommends Bull Spread on Bank Nifty

Derivative Strategy

Bull Spread Strategy on Bank Nifty

Buy Bank Nifty (28-August Expiry) 51000 CALL at Rs 355 and simultaneously sell 51500 Call at Rs 153

Lot Size 15

Cost of the strategy Rs 202 (Rs 3030 per strategy)

Maximum profit Rs 4470 If Bank Nifty closes at or above Rs 51500 on 28 August

expiry.

Break Even Point Rs 51202

Risk Reward Ratio 1: 1:48

Approx margin required Rs 15000

Rationale:

Short covering is seen in the Bank Nifty Futures, where we have seen 3 per cent fall in the open interest with Bank Nifty rising by 0.59 per cent.

 

Short term trend of the Bank Nifty is positive as it is placed above its 5, 11 and 20 day EMA.

Momentum Indicators and Oscillators are in rising mode and placed above 50 on the daily chart, indicating bullish trend.

Amongst the Bank NIFTY options, Put writing is seen at 51000-50500 levels.

(Nandish Shah is a technical research analyst at HDFC Securities. Views expressed are his own.)