Technical Analysis

Bull call spread on Karnataka Bank

KS Badri Narayanan | Updated on November 23, 2014 Published on November 23, 2014

The stock is ruling at a crucial level now. A conclusive close above ₹138 will take the stock higher to ₹162 or even to ₹198.

F&O pointers: Karnataka Bank witnessed a rollover of 19 per cent to December series. Option trading indicates ₹150 as a crucial level for Karnataka Bank. The stock has support at ₹140.

Strategy: Traders can consider bull-call spread on Karnataka Bank, using December series.

This can be initiated by selling ₹155 call and simultaneously buying ₹145 call. They closed at a premium of ₹2.30 and ₹5.8 respectively. This will entail an initial outflow of ₹3.5 per contract, which can be the maximum loss in the strategy. This will happen, if Karnataka Bank closes below ₹145.

On the other hand, the position can yield a maximum profit of ₹6.5 a contract, if the stock closes at or above ₹155 at the time of expiry.

This translates into ₹13,000, as the market lot of Karnataka Bank is 2,000 shares.

We advice traders to exit the position if the loss mounts to ₹1.5 a contract.

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