MCX ltd shares have given a breakout after consolidating within a range of Rs 4100 to 3650 forming a broadening triangular pattern.
According to Jay Thakkar, Head of Derivative and Quantitative research at ICICI Securities, "The prices have provided a breakout on the upside from this consolidation with a bullish crossover in the momentum indicator in the short and medium term."
To capture the upside potential, Thakkar recommends a Bull Call Spread Strategy on MCX Ltd:
Bull Call Spread on MCX
Buy 1 lot of MCX 4300 CE at CMP: Rs 181.95
Sell 1 lot of MCX 4500 CE at CMP: Rs 114
Trade details:
Total outflow in this strategy is Rs 67.95 which is the maximum loss if it closes below Rs 4300 at the time of expiry whereas maximum gain will be of 132.05, hence the risk to reward is almost 1:2. The breakeven for this strategy is Rs 4367.95.
Derivative outlook
Thakkar notes that from derivatives point of view the max pain is at Rs 4000 and modified max pain is at Rs 4099 and the prices are trading well above those levels.
The PCR at the start of the August series is trading at the lower levels around 0.56 indicating limited downside from these levels. "The stock has witnessed significant long built up from the last week of July, hence from both technically and derivatives wise the upward trend continuation is likely, so a Bull Call Spread is recommended, " added Thakkar.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
