F&O Strategy: Nandish Shah recommends Bull Spread on Bata India

Bull Spread Strategy on Bata India

Buy BATA (27-oct Expiry) 1840 CALL at Rs 41.70 & simultaneously sell 1900 CALL at Rs 21.05

Lot Size 275

Cost of the strategy Rs 20.65 (Rs 5,679 per strategy)

Maximum profit Rs 10,821; if Bata closes at or above Rs 1,900 on 27-Oct expiry.

Breakeven Point Rs 1,860.65

Approx margin required Rs 23,000

Rationale:

• 
  We have seen long build up in the Bata futures on Wednesday, where we have seen 6 per cent addition (Prov) in Open Interest with price rising by 1.28 per cent.
  
• 
  The stock price has formed double bottom around Rs 1,755 level.
  
• 
  The short term trend of the stock turned positive as stock price is trading above its 5- and 11-day EMA.
  
• 
  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.

Disclaimer: Nandish Shah is Sr. Derivatives & Technical Research Analyst at HDFC Securities. He doesn’t hold any position in the stock. Views are personal.