According to HDFC Securities, bull spread strategies on Bank Nifty call options have been recommended for the 25 August expiry. The strategy involves buying the 58,500 call option at ₹503 while simultaneously selling the 59,000 call option at ₹313 with a lot size of 30. This position offers a maximum profit of ₹9,300 if Bank Nifty closes at or above 59,000 on expiry, with maximum loss limited to ₹5,700 if the index closes at or below 58,500. The breakeven level is placed at 58,690, providing a risk-reward ratio of 1:1.63 and requiring an approximate margin of ₹35,000.
As reported by HDFC Securities, the recommendation is based on signs of short covering in Bank Nifty futures, where open interest has declined alongside rising prices. The short-term trend remains positive with the index trading above its 5-day and 20-day exponential moving averages (EMAs). The FII long-to-short ratio in index futures stands at an oversold level of 0.14, indicating potential for further short covering. Aggressive put writing has been observed at the 58,000 and 57,500 strike levels, while the Relative Strength Index (RSI) remains in a rising mode above the 50 mark on the daily chart.
For Union Bank, the recommended bull spread strategy involves buying the 185 call option at ₹3.96 and selling the 190 call option at ₹2.44 for the 25 August expiry with a lot size of 4,425. This position offers a maximum profit of ₹15,399 if the stock closes at or above ₹190 on expiry, with maximum loss capped at ₹6,726 if Union Bank closes at or below ₹185. The breakeven point is ₹186.52, providing a risk-reward ratio of 1:2.29 and requiring an approximate margin of ₹28,000.
According to HDFC Securities, short covering has been witnessed in Union Bank futures during the week, with open interest declining while the stock price gained 3.8 per cent. The stock has registered a breakout on the daily chart with higher trading volumes. The short-term trend remains positive as the stock is trading above its 5-day and 11-day EMAs. Momentum indicators, including the RSI and Money Flow Index (MFI), are in an upward trajectory and remain above the 50 level on the daily chart, suggesting strength in the prevailing uptrend.
