F&O Radar | Implement Bull Call Spread in Nifty to take advantage of potential indexoing

The handy index registered a modest recovery of 0.97% on the weekly graph. However, the broader technical structure remains weak because the index continues to form increasingly lower highlights and lower lows.

On the weekly period of time, Nifty is confronted with resistance in the vicinity of 24,903 in the simple advancing average of 20 weeks, also tailored to the middle Bollinger band.

“A persistent movement above this level can clear the way for further upward momentum,” believes Preeti K Chabra, founder of Trade Delta.

On the other hand, strong support is seen in the 40 -week EMA, currently placed on 24,404, which marks an important level to check. The weekly RSI is at 53.3, just below the signal line but trending up, which contains a mild bullish prospect.

From a daily perspective, the index is broken from a steeply downwards, so that a bullish structure is formed in the short term. It now acts just below the 40-day SMA on 24,905 and the 20-day SMA on 24,990, which coincides with the Middle Bollinger Band.

“A persistent outbreak above this zone is considered crucial to activate a stronger bullish momentum,” Chabra added. On the front support, the index above 38.2% Fibonacci racement on 24,803, signed of the highest height of 25,448 of 25,448 of 24,404. The daily RSI at 49.2 has crossed over its signal line, which strengthens a light bullish tone. On the derivatives side, the optical chain indicates a mild bullish bias, with settlement visible in in-the-money call options.

Given the current technical set -up, Pre andTi Kbra suggests traders to consider a bull call spread strategy to take advantage of the potential reversal, while retaining a defined risk profile.

Bull Call Spread

Traders can use a bull’s call to earn money with a profit from a potential marketbound. It includes buying and selling on -call options with the same expiry date, but different exercise prices. The purchased call is usually in-the-money (ITM) or AT-the-Money (ATM), while the call sold is outside the money (OTM). This strategy results in a net debit for the trader, because the costs of the ITM/ATM call are partially compensated by the cash flow generated by the short allocation of the OTM call.

Below is the payment graph of the strategy:

(Disclaimer: recommendations, suggestions, views and opinions of the experts are their own. These do not represent the views of economic times)