ITC Options Radar: Deploy debit spread to chase bullish momentum
ITC share price bottomed out and continued moving in an uptrend after it dipped twice to Rs 399 in the months of February and March, from where it took support. The stock has been creating higher highs and higher lows since then.
On 5th March, a golden crossover pattern formed when the 10 DEMA line crossed the 20 DEMA line from below. The stock was also showing some resistance at its 100 DEMA which it finally breached on 26th April, however, has not managed to entirely sustain above the same.
On Monday, the stock closed at Rs 434.75, near its 10 and 100 DEMA.
ITC seasonality chart shows that the stock has gained 5.5% on an average 100% of the times in the month of May in the last 5 years.
“This gives us an idea of where the stock is headed for the coming month. Trading in an up move for over two months, it is taking support at HMA 50. Most of the other technical indicators like RSI, MACD & ADX are signaling a strong buy. On the top of it, the FMCG sector looks attractive and safer for the upcoming election driven market volatility,” says research analyst Madhu Bansal of The Finberg.
Below is a debit spread strategy by Madhu Bansal to trade the stock amid its bullish moves:
(Prices as of 06.05.24)
What is a debit spread?
The strategy includes buying a call option of ITM or ATM strike prices and selling the ones that are OTM strike prices. The larger the spread width between the long call and the short short, the more premium will be paid, and the maximum potential profit will be higher.
This strategy
