Suggest Bear Spread strategy on Bank Nifty for June series: HDFC Securities

Short term trend of the Bank Nifty has turned weak as it has closed below its 5 and 11-day EMA, says Nandish Shah of HDFC Securities

Bear Spread Strategy on Bank Nifty (29-June Expiry) 

Buy BANKNIFTY 44,000 PUT at Rs 436 & simultaneously sell 43,500 PUT at Rs 264

Lot Size: 25

Cost of the strategy: Rs 172 (Rs 4,300 per strategy)

Maximum profit: Rs 8,200 if Bank Nifty closes at or below 43,500 on 29 June expiry.

Breakeven Point: Rs 43,828

Approx margin required: Rs 22,000

Rationale:

We have seen short build up in Bank Nifty Futures, where we have seen 5 per cent rise in Open Interest (Prov) with Bank Nifty falling by 0.63 per cent.
 

Short term trend of the Bank Nifty turned weak as it has closed below its 5 and 11 day EMA.

 

In the option segment, we have seen Call writing at 44,000-44,500 levels.

RSI Oscillator(11) has formed negative divergence on the daily chart.

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/index. Views are personal.