Bear Spread strategy on Bank Nifty (Expiry 06 August)

Buy Bank Nifty 21500 Put at Rs 386 & simultaneously sell 21000 Put at Rs 215

Lot Size 25

Cost of the strategy Rs 171 (Rs 4275 per strategy)

Maximum profit Rs 8225 If Bank Nifty closes at or below 21000 till 06-August expiry.

Breakeven Point Rs 21329

Rationale:

Short build up is seen in the Bank Nifty Futures’ where we have seen 28% (Prov) rise in the Open Interest with Bank Nifty moving down by 2 per cent.

Bank Nifty has broken down below the upward slopping trend line, adjoining the lows of 16-June and 16-July 2020.

Short term trend has turned negative as Bank Nifty has closed below its 5 and 20-day SMA

RSI Oscillator has closed below 50 levels, Indicating weakness in the Bank Nifty

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Disclaimer: Nandish Shah is Technical Research Analyst at HDFC Securities. Views are personal.