Disclaimer: This article is written by Nandish Shah, senior technical/derivative analyst at HDFC Securities. Views expressed are his own. Readers’ discretion is advised.
Derivative Strategy by HDFC Securities
BEAR SPREAD STRATEGY ON MIDCP NIFTY
1) Buy MIDCP NIFTY (29-Sept Expiry) 14900 PUT at Rs 217 & simultaneously sell 14800 PUT at Rs 173
Lot Size 120
Maximum Loss Rs 5280 If MIDCP NIFTY closes at or above 14900 on 29 Sept expiry.
Breakeven Point Rs 14856
Risk Reward Ratio 1: 1.27
Approx margin required Rs 36000
Rationale:
• Short build up is seen in the MIDCP NIFTY Futures at higher levels, where we have seen rise in Open interest with price witnessing correction from the morning highs.
• Short term trend remains weak as MIDCP NIFTY is placed below its 5 and 11 day EMA.
• Amongst the options, aggressive call writing is seen at 15000 levels.
BULL SPREAD Strategy on Canara Bank
2) Buy Canara Bank (29-Sept Expiry) 132.5 CALL at Rs 3.19 & simultaneously sell 135 CALL at Rs 2.40
Lot Size 6750
Maximum Loss Rs 5332 If Canara Bank closes at or below 132.5 on 29 Sept Expiry.
Breakeven Point Rs: 133.29
Risk Reward Ratio 1: 2.16
Approx margin required Rs 61000
Rationale:
• Long build-up was seen in Canara Bank futures, with open interest rising alongside a 0.7 per cent increase in price.
• Stock has been consolidating after breaking out on the weekly chart for the week ended Aug 7.
• Stock’s short-term trend remains positive, as it is trading above its 5 and 10-week EMAs.
Note : It is advisable to book profit in the strategy when ROI exceeds 20 per cent.
