Derivative Strategy
Bull Spread Strategy on Tata Power
Buy Tata Power (29-August Expiry) 470 CALL at Rs 17.4 and simultaneously sell 500 CALL at Rs 7.6
Lot Size 1,350
Cost of the strategy Rs 9.8 (Rs 13,230 per strategy)
Breakeven Point Rs 479.8
Risk Reward Ratio 1:2.06
Approx margin required Rs 22,000
Rationale:
— Long build-up is seen in the Tata Power Futures where we have seen 1 per cent (Prov) rise in Open interest with price rising by 2.38 per cent.
— Stock price has broken out on the daily chart to close at an all-time high with a sharp rise in volumes.
— Stock price has been forming a bullish higher top higher bottom formation on the weekly chart.
— Momentum Indicators and Oscillators are showing strength in the current uptrend of the stock.
Note: It is advisable to book profit in the strategy when ROI exceeds 20 per cent.
(Nandish Shah is a senior technical/derivative analyst at HDFC Securities. Views expressed are his own.)
First Published: Aug 02, 2024 | 6:19 AM IST
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Conclusion
Investing in the stock market can often feel like navigating a labyrinth, full of twists, turns, and occasional setbacks. However, armed with the right strategies, like the Bull Spread Strategy on Tata Power elucidated here, investors can find themselves on a potentially prosperous path. Drawing from the expertise of Nandish Shah from HDFC Securities, this strategy not only showcases the merit of tactical investment but also accentuates how market indicators, such as the bullish trend demonstrated by Tata Power, can be leveraged for considerable gains.
Furthermore, this narrative underscores the essence of staying current with market trends and meticulously analyzing stock movements. Ingeniously, it wraps a technical analysis in a tale of anticipation, where profit hinges on strategic calls and market dynamics. It’s more than just numbers; it’s about understanding the pulse of the market and responding adeptly, turning the volatility of the stock market into a golden opportunity for financial growth.
So whether you’re a seasoned investor or a curious newcomer, strategies like these invite you to look beyond the surface, urging you to engage with the market in a more profound and analytical manner. It’s a reminder that in the vast sea of stocks, there are indeed treasures to be found, provided one knows where—and how—to look.
Lastly, remember that the world of finance is endlessly fascinating and perpetually evolving. For those inclined to delve deeper and stay ahead, resources like DeFi Daily News can be your compass in the ever-exciting journey through the financial markets. So set sail, with strategies as your map, towards the treasure islands of investment opportunities waiting to be discovered.
