F&O Radar | Deploy Bull Call Spread in Nifty to benefit from bullish stance
Nifty index hit a fresh high of 24,661 on Tuesday after giving a range breakout on a daily frame. It has formed a small-bodied Bullish candle in the same time frame and follow-up buying seems to be intact with sustained buying.
“It (Nifty) continues escalating upwards steadily within a smaller intraday range and any minor dips are getting absorbed quickly by the bulls,” said Chandan Taparia, Senior VP, Equity Derivatives & Technicals, Broking & Distribution, Motilal Oswal.
Currently, it holds above 24,200 zones, momentum could extend towards 24,750 and 25,000 zones, added Chandan.
India VIX was up by 0.25% from 14.11 to 14.22 levels. Volatility slightly inched higher but is hovering at its lower zones which is still comforting for the bulls to add momentum.
Option data suggests a broader trading range in between 24,200 to 25,000 zones while an immediate range between 24,400 to 24,800 levels.
“Overall we can ride the positive to range-bound stance and are expecting that any small declines could be bought for an upside move towards 24900-25000 zones,” Chandan said.
Given such a scenario, Chandan Taparia believes that one can initiate a Bull Call Spread options strategy to get the benefit of a bullish stance without worrying much about theta decay.
Bull Call Spread
A bull call spread is an options trading strategy that uses two call options. It is deployed usually when a trader anticipates a moderate rise in the price of the underlying asset.
(Prices as of July 16)
Below is the payoff graph of the strategy:
