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

The derivative analyst from HDFC Securities recommends to Buy IOC 83 Call and simultaneously SEll 85 Call of the January expiry.

Topics
F&O Strategies | Indian Oil Company | Trading strategies

Nandish Shah 



Derivative Strategy

Bull Spread Strategy on Indian Oil Corporation (IOC)


Buy IOC (25-Jan Expiry) 83 CALL at Rs 1.10 & simultaneously sell 85 CALL at Rs 0.40

Lot Size: 9,750

Cost of the strategy: Rs 0.70 (Rs 6,825 per strategy)

Maximum profit: Rs 12,675; if IOC closes at or above Rs 85 on 25-Jan expiry.

Breakeven Point: Rs 83.70

Approx margin required: Rs 28,400

Rationale:

  • We have seen long build up in the IOC futures on Thursday, where we have seen 2 per cent addition (Prov) in Open Interest with price rising by 1 per cent.
     
  • The stock price has broken out from the downward sloping trendline on the weekly chart.
     
  • Primary and intermediate trend of the stock is positive as stock price is trading above all important moving averages.
     
  • Momentum Oscillators like RSI (11) and MFI (10) are sloping upwards and placed above 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.
 


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First Published: Fri, January 20 2023. 08:40 IST

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