Bharat Forge option trading strategy: Deploy a bull spread for Dec expiry

Derivative strategy

BULL SPREAD Strategy on BHARAT FORGE

Buy BHARAT FORGE (expiry December 28) 1130 CALL for Rs 36 and simultaneously sell 1180 CALL for Rs 20

Lot size 500

Cost of the strategy Rs 16 (Rs 8,000 per strategy)

Maximum winnings Rs 17,000; If BHARAT FORGE closes at or above Rs 1,180 on December 28.

Break-even point: Rs 1146

Risk-reward ratio: 1:2.12

Estimated margin required: Rs 20,000

Rode:

• A long build-up is seen in the BHARAT FORGE Futures on Thursday, where Open Interest rose 10 percent (prov) and 0.5 percent.
  
• The stock price has left the downtrend line and is bordering the highs of September 15 and November 24, 2023.
  
• The shares form a bullish higher top and higher bottom formation on the weekly chart.
  
• Oscillators such as RSI and MFI are in rising mode and are above 60 on the daily chart, indicating the strength of the stock.

Note: It is advisable to book profits in the strategy when the ROI exceeds 20%.

Disclaimer: Nandish Shah is a senior derivatives and technical research analyst at HDFC Securities. He has no position in the shares. Opinions are personal.