Bull spread strategy on Escorts by Nandish Shah of HDFC Securities

Bull Spread strategy on Escorts

 

Buy ESCORTS APRIL 700 Call at Rs 48 & simultaneously sell 740 call at Rs 35

 

Lot Size: 1,100.


Cost of the strategy: Rs 13 (Rs 14,300 per strategy)


Maximum profit: Rs 29,700 if Escorts closes at or above 740 on April expiry.


Breakeven Point: Rs 713


Rationale:

 

-- Long build-up is seen in the Escorts Futures’ where we have seen 14 per cent (Prov) rise in the Open Interest with price moving up by 7 per cent.


-- The stock price has given breakout on the daily chart by closing above the resistance level of 676


-- Primary trend of the stock is positive where the stock price is trading above its all important moving averages


-- RSI Oscillators has reached above the level of 50, indicating sustainability of the bullish trend


-- Auto, as a sector, looking good for the short-term

Disclaimer: Nandish Shah is a Technical & Derivative Analyst at HDFC securities. Views are personal.