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HomeNewsF&O Strategy: Here's why Nandish Shah recommends Bull spread on M&M Finance

F&O Strategy: Here’s why Nandish Shah recommends Bull spread on M&M Finance

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Derivative Strategy


Bull Spread Strategy on M&M Finance


Buy (29-Dec Expiry) 220 Call at Rs 8.15 & simultaneously sell 230 CALL at Rs 4.15


Lot Size: 4,000


Cost of the strategy: Rs 4 (Rs 16,000 per strategy)


Maximum profit: Rs 24,000; If closes at or above Rs 230 on 29-Dec expiry.


Breakeven Point: Rs 224


Approx margin required: Rs 31,000


Rationale:


We have seen long build up in the futures on Thursday, where we have seen 4 per cent addition (Prov) in Open Interest with price rising by 2 per cent.


The short term trend of the stock is positive as it is trading above its 11- and 20-day EMA.


The stock price is on the verge of breaking out from the downward sloping trendline, adjoining the highs of 15-Sept and 11-Nov 2022.


The momentum Oscillators like RSI (11) and MFI (10) are in rising mode and placed above 60 on the daily chart, indicating strength in the current uptrend.


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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