InvestorQ : Is there a specific strategy I can use when I have a moderately bullish view?
manisha Kolvenkar made post
F&O

Is there a specific strategy I can use when I have a moderately bullish view?

image
Aashna Tripathi answered.
2 years ago
Follow

You can use what are called Spreads for limited profits. Spreads are quite common when you expect the stock to be moderately bullish or moderately bearish. Let us take the case of Tata Motors. The stock is currently quoting at Rs.400. The 410 call options are quoting at Rs.12 and the 430 call options is quoting at Rs.6. You are moderately bullish on the stock. What should you do? You can create a bull-call spread on Tata Motors. You can buy the 410-call option at Rs.12 and sell the 430 calls at Rs.6. Thus, your net cost of option comes down to Rs.6 instead of Rs.12. So, your break-even is Rs.416 and your maximum profit is at Rs.430 after which your profits are capped. On the downside, your maximum loss will be capped at Rs.6 (12-6). This strategy can be effectively only when you are moderately bullish on the stock.

1 Views