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Derivative Strategy
BULL SPREAD Strategy on Vedanta
Buy Vedanta (25-Jan expiry) 280 CALL at Rs 6.20 & simultaneously sell 290 Call at Rs 3.10
Lot Size 2,300
Cost of the strategy Rs 3.10 (Rs 7,130 per strategy)
Maximum profit Rs 15,870; If Vedanta closes at or above Rs 290 on 25-Jan expiry.
Breakeven Point: Rs 283.10
Risk Reward Ratio: 1:2.23
Approx margin required: Rs 22,200
Rationale:
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Long build up is seen in Vedanta Futures on Thursday where Open Interest rose by 5 per cent (prov) with it rising by 2.83 per cent.
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The stock price has broken out on the daily chart where it closes at highest level since 01-August 2023.
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The stock price has broken on the weekly chart from the downward sloping trendline, adjoining the highs of week ending 13-April 2022 and 20-Jan 2023.
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Oscillator like RSI and MFI are in rising and placed above 60 on the weekly chart, indicating strength in the stock.
Note: It is advisable to book profit in the strategy when ROI exceeds 20%.
Disclaimer: Nandish Shah is Sr. Derivatives & Technical Research Analyst at HDFC Securities. He doesn’t hold any position in the stock. Views are personal.
First Published: Jan 12 2024 | 6:39 AM IST
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