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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:
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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.
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During the recent correction, the stock price took support at 100-day EMA and reversed northwards.
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The short-term trend of the stock turned positive as stock price is trading above its 5-, 20-day EMA.
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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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