F&O: Analyst recommends Bull spread strategy on Hero MotoCorp, PNB
Nandish Shah, deputy vice president, HDFC Securities, has recommended a bull spread strategy on Hero MotoCorp and Punjab National Bank.
Disclaimer: Views and outlook in this report belong to the brokerages and analysts cited. They do not reflect the views of Business Standard. Readers are advised to exercise discretion.
Nandish Shah, deputy vice president, HDFC Securities Bull spread strategy on Hero MotoCorp Buy Hero Moto Corp (November 23 expiry) ₹5,600 CALL at ₹89 and simultaneously sell ₹5,700 CALL at ₹58 Lot size 150 Maximum profit ₹10,350 if Hero MotoCorp closes at or above ₹5,700 on November 23 expiry. Maximum loss ₹4,650 of Hero MotoCorp closes at or below ₹5,600 on November 23 expiry. Breakeven point: ₹5,631 Risk reward ratio 1:2.23 Approx margin required: ₹29,000 Rationale: - Short covering is seen in Hero Moto Corp Futures, with open interest falling alongside a 3 per cent rise in price. - Short term trend is positive as stock price is placed above its 5 and 11 day EMA. - Stock price has broken out from the downward sloping trendline on the daily charts. - Momentum Indicators and Oscillators are in rising mode and placed above 50 on the daily chart, suggesting strength in stock.
Note: It is advisable to book profit in the strategy when ROI exceeds 20 per cent. ALSO READ: NSE, BSE to hold Diwali Muhurat Trading on Nov 8; check timings Bull spread strategy on PNB Buy PNB (November 23 expiry) ₹127 CALL at ₹2.90 and simultaneously sell ₹130 CALL at ₹1.70 Lot size 8,000 Maximum profit ₹14,400 if PNB closes at or above ₹130 on November 23 expiry. Maximum loss ₹9,600 if PNB closes at or below ₹127 on Nov 23 expiry.
Breakeven point: ₹128.2 Risk reward ratio 1:1.5 Approx margin required: ₹1,87,000 Rationale: - Long build-up was seen in PNB futures, with open interest rising alongside a 3 per cent rise in price. - Short term trend is positive as stock price is placed above its 5 and 11 day EMA. - Stock price has been forming higher top higher bottom formation on the weekly charts. - Momentum Indicators and Oscillators are in rising mode and placed above 50 on the daily chart, suggesting strength in stock. Note : It is advisable to book profit in the strategy when ROI exceeds 20 per cent.
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