Derivative Strategy
Bull Spread strategy on HCL Technologies
Buy HCL TECH (23-Feb Expiry) 1,150, CALL at Rs 23.50 & simultaneously sell 1,200 CALL at Rs 7.50
Lot Size: 700
Cost of the strategy: Rs 16 (Rs 11,200 per strategy)
Maximum profit at Rs 23,800 If HCL Tech closes at or above 1,200 on 23 February expiry
Breakeven Point: Rs 1,166
Approx margin required: Rs 28,100
Rationale:
We have seen long build up in the HCL Tech Futures on Thursday, as we saw 3 per cent addition (Prov) in open interest, with price rising by 1.5 per cent. The stock price broke out on the daily chart where it closes at highest level since April 2022. The primary and intermediate trend of the stock is positive as it traded above all important moving averages. The Momentum Oscillators like RSI (11) and MFI (10) are sloping upwards and placed above 60 on the daily chart, which indicates 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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