Nandish Shah of HDFC Sec recommends ‘Bull Spread’ strategy on M&M Finance | News on Markets

Purchase M&M FINANCE (26-Sept Expiry) Rs 330 CALL at Rs 8.7 and sell Rs 340 CALL at Rs 5.20 at the same time.

Dimensions of the Lot: 2000

The strategy costs Rs 3.5 (each strategy costs Rs 7000).

Maximum earnings of Rs. 13,000 If, on September 26 expiry, M&M Finance closes at or above Rs 340.

Breakeven Value: 333.5 Rupees

Ratio of Risk to Reward: 1:1.86

A rough margin of Rs. 23000 is needed.

Justification

There has been a significant build-up in the M&M Finance Futures since the September series, during which the price has increased by 5% and the open interest has increased by 7%.

On the weekly chart, the stock price has broken out from the trendline that slopes downward along with an increase in volume.

On the monthly chart, the stock price has been forming a bullish higher top higher bottom structure.

The present increase in the stock is supported by momentum indicators and oscillators.

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