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Derivative Strategy
BULL SPREAD Strategy on BHARAT FORGE
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Buy BHARAT FORGE (28-DEC expiry) 1130 CALL at Rs 36 & simultaneously sell 1180 CALL at Rs 20
Lot Size 500
Cost of the strategy Rs 16 (Rs 8,000 per strategy)
Maximum profit Rs 17,000; If BHARAT FORGE closes at or above Rs 1,180 on 28-Dec expiry.
Breakeven Point: Rs 1146
Risk Reward Ratio: 1:2.12
Approx margin required: Rs 20,000
Rationale:
- Long build up is seen in the BHARAT FORGE Futures on Thursday where Open Interest rose by 10 per cent (prov) with it rising by 0.5 per cent.
- Stock price has broken out from the downward sloping trendline, adjoining the highs of 15-Sept and 24-Nov 2023.
- Stock is forming bullish higher top higher bottom formation on the weekly chart.
- Oscillator like RSI and MFI are in rising mode and placed above 60 on the daily chart, indicating strength in the stock.
Note: It is advisable to book profit in the strategy when ROI exceeds 20%.
Disclaimer: Nandish Shah is Sr. Derivatives & Technical Research Analyst at HDFC Securities. He doesn’t hold any position in the stock. Views are personal.
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