F&O Strategy: Nandish Shah recommends a Bull Spread on Canara Bank

The technical analyst from HDFC Securities recommends buying Canara Bank 240 Call and simultaneously selling 250 Call for the September series.

BULL SPREAD Strategy on Canara Bank

Buy Canara Bank (29-Sept Expiry) 240 Call at Rs 11.3 & simultaneously sell 250 Call at Rs 7.3

Lot Size 2,700

Cost of the strategy Rs 4 (Rs 10,800 per strategy)

Maximum profit Rs 16,200; If Canara Bank closes at or above Rs 250 on 29-Sept expiry.

Breakeven Point Rs 244

Approx margin required Rs 33,000

Rationale:

We have seen long build up in the Canara Bank futures, where we have seen 15 per cent addition (Prov) in Open Interest with price rising by 2.9 per cent.

The stock price has broken out from the downward sloping trendline on the weekly chart, adjoining the highs of week ending 04-Feb and 08-April 2022.

Momentum oscillators like RSI(11) and MFI(10) are in rising mode and placed above 60 on the weekly chart, indicating strength in the current uptrend.

The Nifty PSU Bank index has broken out on the daily chart.

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