Utilising Derivatives
A Bull Spreading Approach for Tata Motors
1) Purchase Tata Motors (1020 CALL, 25 July expiry) at Rs 22 and sell Rs 1,060 at the same time.
PHONE: (10) 6.
Size of Lot: 550
The strategy costs Rs 11.4 (Rs 6,270 for each strategy).
Maximum earnings of Rs. 15,730 If, on July 25, Tata Motors closes at or above Rs 1,060
expire.
Break Even: 1,031.4 Rupees
Ratio of Risk to Reward: 1:2.51
A rough margin of Rs. 19000 is needed.
Justification
In the Tata Motors Futures, there has been a long build-up, with prices rising by 2.31 percent and an open interest increase of 2% (Prov). Volume increases in tandem with price increases, indicating strength in the upward
shift.
The stock price is about to break out of the resistance area between the Rs. 1,005 and Rs. 1,010 levels. Oscillators and momentum indicators are strong in the current