Technical Analysis

Future perfect: Consider bull call spread on YES Bank

KS Badri Narayanan | Updated on April 07, 2019 Published on April 07, 2019

While the outlook for the long term remains negative for YES Bank (₹275), it is positive for the short and medium term. The stock finds immediate resistance at ₹286 and a conclusive close above that could trigger a rally and take the stock to ₹336. A close below ₹237 will alter the medium-term positive outlook. The stock finds immediate support at ₹252.

F&O pointers: The counter witnessed unwinding of open positions on Friday that dragged the price from day's high to a low; open interest fell marginally on Friday. However, over the last week, YES Bank April futures saw a steady build up. Option trading indicates a trading range of ₹300-240.

Strategy: Conservative traders can consider a bull call spread strategy. This can be initiated by buying ₹260-call and simultaneously selling the ₹280-call that closed with a premium of ₹18.7 and ₹9.8 respectively.

 

 

The maximum possible profit and loss for a contract is ₹11.1 ₹8.9 respectively. As the market lot is 1,750, this will imply an outgo of ₹15,575, which would be the maximum loss. Maximum profit will occur if YES Bank closes at or above ₹280, while if it closes below ₹260, there is a risk of higher loss. We advice traders exit position if the loss mounts to ₹8,500 and hold the position for at least two weeks.

Traders with high-risk appetite can consider buying ₹280-call on YES Bank. They can exit the position if the premium rises to ₹15 or falls to ₹5.

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