F&O Call: Nandish Shah recommends Bull Spread strategy on UltraTech Cement

The derivative analyst from HDFC Securities suggests to BUY 7,200 Call for January 25 expiry of UltraTech Cement, and simultaneously SELL 7,400 Call of the same series.

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:

• 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.
   
• The stock price has broken out from the downward sloping trendline on the daily chart.
   
• Primary trend of the stock is positive as stock price is trading above its 100- and 200- day EMA.
   
• 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.