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Derivative Strategy
Bull Spread Strategy on UltraTech Cement
Buy ULTRATECH CEM (25-Jan Expiry) 7200 CALL at Rs 115 & simultaneously sell 7400 CALL at Rs 51
Lot Size: 100
Cost of the strategy: Rs 64 (Rs 6,400 per strategy)
Maximum profit: Rs 13,600 if Ultratech Cement closes at or above Rs 7,400 on 25 January expiry.
Breakeven Point: Rs 7,264
Approx margin required: Rs 25,042
Rationale:
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We have seen long build up in the Ultratech Futures on Thursday, where we have seen 3 per cent addition (Prov) in Open Interest with price rising by 1.87 per cent.
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The stock price has broken out from the downward sloping trendline on the daily chart.
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Primary trend of the stock is positive as stock price is trading above its 100- and 200- day EMA.
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Momentum Oscillators like RSI (11) and MFI (10) are sloping upwards and placed near 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 per cent.
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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