Derivative strategy by Nandish Shah of HDFC Securities
1) Bear spread strategy on Nifty
– Buy NIFTY (28-April Expiry) 24,100 Put at ₹157 & simultaneously sell 24,000 Put at ₹117
– Lot Size 65
– Maximum profit ₹3,900 if Nifty closes at or below 24,000 on April 28 expiry.
– Maximum loss ₹2,600 if Nifty closes at or above 24,100 on April 28 expiry.
– Breakeven point ₹24,060
– Risk reward Ratio 1: 1.5
– Approx margin required ₹31,000
Rationale:
– Short build up is seen in the Nifty Futures, where open interest rose by 6 per cent along with price fall of 0.5 per cent.
– Nifty open interest Put Call ratio fell to 0.93 from 1.02 levels on the back of call writing at 24,200-24,300 levels.
– Short term trend for the Nifty turned weak as it has closed below its 5 day EMA.
Note: It is advisable to book profit in the strategy when ROI exceeds 20 per cent.
2) Bull spread strategy on AU BANK
– Buy AU BANK (April 28 expiry) ₹1,060 Call at ₹18.5 and simultaneously sell ₹1,080 Call at ₹11.15
– Lot size 1,000
– Maximum profit ₹12,650 if AU BANK closes at or above ₹1,080 on April 28 expiry.
– Maximum loss ₹7,350 if AU BANK closes at or below ₹1,060 on April 28 expiry.
– Breakeven point ₹1067.35
– Risk reward Ratio 1: 1.72
– Approx margin required ₹37,000
Rationale:
– Long build up is seen in the AU BANK Futures where we have seen sharp rise in OI with price rising by 1.5 per cent.
– Short term trend of the stock is positive as it is placed above its 5 and 20 day EMA
– Momentum indicators and oscillators are in rising mode and placed above 50 on the daily chart, suggesting strength in current uptrend.
Note : It is advisable to book profit in the strategy when ROI exceeds 20%.
============================================= (Disclaimer: This article is written by Nandish Shah, senior technical/derivative analyst, HDFC Securities. View expressed are his own.)