F&O strategy: Nandish Shah recommends Bull Spread on Nifty, Shriram Finance

Derivative strategy by Nandish Shah of HDFC Securities

BULL SPREAD STRATEGY ON NIFTY

Buy NIFTY (14-July Expiry) 24200 CALL at Rs 197 & simultaneously sell 24500 CALL at Rs 73 
Lot Size 65 
Maximum profit ₹11,440; if NIFTY closes at or above 24500 on 14 July expiry. 
Maximum Loss ₹8,060; if NIFTY closes at or below 24200 on 14 July expiry. 
Breakeven Point 24324 
Risk Reward Ratio 1: 1.42 
Approx margin required ₹31,500

Rationale:

• 
  Short covering is seen in the NIFTY Futures, where we have seen fall in Open interest along with price rise.
• 
  Short term trend remains strong as NIFTY is placed above its 5 and 20 day EMA.
• 
  Amongst the options, aggressive put writing is seen at 24000-24200 levels.
• 
  RSI Oscillator is in rising mode and placed above 60 on the daily chart.

BULL SPREAD strategy on SHRIRAM FINANCE

Buy Shriram Finance (28-July Expiry) 1080 CALL at ₹26.1 & simultaneously sell 1100 CALL at ₹18.6  Lot Size 825  Maximum profit ₹10,313; if Shriram Finance closes at or above ₹1,100 on 28 July expiry.  Maximum Loss ₹6,187; if Shriram Finance closes at or below ₹1,080 on 28 July Expiry.  Breakeven Point ₹1,087.5  Risk Reward Ratio 1: 1.67  Approx margin required ₹31,000  Rationale: 

• 
  Long build up is seen in the Shriram Finance Futures during the week where we have seen rise in OI with price rising by 2 per cent.
• 
  Short term trend of the Shriram Finance stock is positive as it is placed above its 5 and 11 day EMA
• 
  Stock price has broken out from the downward sloping trendline.
• 
  Oscillators like RSI and MFI are in rising mode and placed above 60 on the daily chart, suggesting strength in current uptrend.

  Note : It is advisable to book profit in the strategy when ROI exceeds 20 per cent.  (Disclaimer: Nandish Shah is a senior technical/derivative analyst at HDFC Securities. Views expressed are his own.)