F&O Strategy: Nandish Shah recommends a Bull Spread on HCL Tech for August

The technical analyst from HDFC Securities recommends buying HCLTECH 960 Call and simultaneously selling 1000 Call of the August series.

Derivative Strategy

BULL SPREAD Strategy on HCLTECH

Buy HCL TECH (25-August Expiry) 960 CALL at Rs 22.50 & simultaneously sell 1000 CALL at Rs 9

Lot Size 700

Cost of the strategy Rs 13.5 (Rs 9,450 per strategy)

Maximum profit Rs 18,550 If HCL TECH closes at or above Rs 1,000 on 25 August expiry.

Breakeven Point Rs 973.5

Approx margin required Rs 23,500

Rationale:

• We have seen minor long build up in the HCL Tech futures on Thursday, where we have seen 1 per cent addition (Prov) in Open Interest with price rising by 0.10 per cent.
   
• Short term trend of the stock turned positive and the stock is trading above its 5 and 20 day EMA.
   
• RSI(11) Oscillators is in rising mode and placed above 60 on the daily chart, Indicating strength in the current uptrend.
   
• Plus DI is trading above minus DI while the ADX line is placed above 20, Indicating stock price is likely to gather momentum in the coming days.
   
• Nifty IT index has broken out on the daily chart, suggesting more upside in the coming days.

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