HDFC Securities has suggested a Bull Spread Strategy on IndiGo shares, where investors can earn up to ₹24,300 at a cost of ₹5,700 by buying 6000 calls and selling 6200 calls. Based on technical indicators, a short-term rally is indicated in the stock.
IndiGo Stock Trading: HDFC Securities has outlined a Bull Spread Strategy that offers good returns with low risk, presenting an opportunity for b profits by November 25. This news is especially for investors seeking secure returns at a low cost.
How the Bull Spread Strategy Works
Nandish Shah, Senior Technical and Derivative Analyst at HDFC Securities, has advised adopting a Bull Spread Strategy on IndiGo shares. In this strategy, investors will buy the 6000 call option with a November 25 expiry for ₹54 and sell the 6200 call option for ₹16. The total cost comes to ₹38, or approximately ₹5,700. This is a limited risk and limited reward strategy.
Potential Profit
A maximum profit of up to ₹24,300 can be earned from this strategy if IndiGo shares close at or above ₹6,200 on November 25. The break-even level is stated as ₹6,038. This means an investor will become profitable if the share price moves above this level. The Risk-Reward Ratio for this strategy is approximately 1:4.26, and it would require a margin of about ₹31,000 to execute.
Why the Strategy Was Suggested
According to the analyst, a Long Build-Up has been observed in IndiGo's futures. Open interest has increased by about 2 percent, and the price has strengthened by 1.9 percent. Technically, the stock has broken above a downtrend line on the daily chart, which indicates further upside. The stock is trading above its 5, 11, and 20-day EMAs. Several momentum indicators also support a rally in IndiGo, suggesting a b short-term trend.
When to Book Profits
Analyst Nandish Shah has advised that it is better to book profits when the returns from this strategy exceed 20 percent. According to current market conditions, IndiGo is likely to continue its rally, but it is considered prudent to secure profits in a timely manner.
Advice for Investors
If you wish to trade with low risk and a defined strategy, this Bull Spread strategy on IndiGo could prove effective. Before making any investment, always consult your financial advisor and thoroughly understand the risks associated with options trading.
