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HomeNewsDerivatives analyst Nandish Shah recommends bull spread strategy on L&T

Derivatives analyst Nandish Shah recommends bull spread strategy on L&T

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Derivative Strategy


Bull Spread Strategy on Larsen & Toubro (L&T)


Buy Larsen (27-oct Expiry) 1920 CALL at Rs 42.45 & simultaneously sell 1960 CALL at Rs 26.45


Lot Size 300


Cost of the strategy Rs 16 (Rs 4,800 per strategy)


Maximum profit Rs 7,200; If L&T closes at or above Rs 1,960 on 29 Sept expiry.


Breakeven Point Rs 1936


Approx margin required Rs 25,000


Rationales:


  • We have seen long build up in the Larsen futures on Thursday, where we have seen 5 per cent addition (Prov) in Open Interest with price rising by 2 per cent.

  • During the recent correction, the stock price took support at 100-day EMA and reversed northwards.

  • The short-term trend of the stock turned positive as stock price is trading above its 5-, 20-day EMA.

  • The momentum oscillator RSI (11) is in rising mode and placed above 50 on the daily chart, indicating strength in the current uptrend.


Disclaimer: Nandish Shah is Technical Research Analyst at HDFC Securities. He doesn’t hold any position in the stock. Views are personal.

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