F&O Strategy: Bull Call Spread on HDFC Bank

The stock of HDFC Bank (₹1,447.90) has been consolidating in recent weeks since a sharp fall in November. The stock finds immediate support at ₹1,400 and ₹1,304. A fall below the latter will change the outlook negative.

On the other hand, it finds immediate resistance at ₹1,465 and ₹1,552. A close above ₹1,600 would change the outlook positive and lift the stock to new highs.

F&O cues: The HDFC Bank April contracts witnessed a steady accumulation of open positions from about 3.6 crore shares to 19.25 crore shares. The counter witnessed a rollover of 95 per cent to April series, a healthy figure.

The HDFC Bank April futures, at ₹1,464.10, against the spot price of ₹1,447.90, indicates long rollovers. Option trading (April) signals that the stock could move in the ₹1,300-1,600 range.

Strategy: Consider a bull-call spread on HDFC Bank. This can be initiated by selling 1,480-call and simultaneously buying 1,460-call. These options closed with a premium of ₹22.40 and ₹32.30 respectively. This strategy would cost ₹9.90 per contract (or ₹5,445 as market lot is 550 shares), which would be the maximum loss. This will happen if the stock rules below ₹1,460.

On the other hand, a profit of ₹5,555 is possible if HDFC Bank rises sharply and moves above ₹1,480. We advise traders to hold the position at least three weeks if the profit is not achieved earlier.

Follow-up: As Maruti Suzuki shares rose sharply last week, we advise traders to book profit in the 12,500-April call.

Note: The recommendations are based on technical analysis and F&O positions. There is a risk of loss in trading