F&O Radar: Implement Bull Call Spread on UPL to profit from a possible bullish move

UPL LIMITEDThe actions of, previously Bound phosphorushas been in a downtrend since its peak in June 2021. It found support around the 520 level, from where it started moving upwards, but since then it seems to be consolidating since June 2022.

The stock is trading around the 560 level, within a range of 520 to 580. Price action The chart indicates that prices are adjusting somewhat.

“UPL is trading at Rs 560.60, forming a symmetrical triangle pattern on the daily time frame. The stock is on the verge of breaking out of this pattern,” said Hardik Matalia, derivatives analyst at Choice Broking. The stock is positioned above all its short-term exponential moving averages (10-day and 20-day EMA) as well as the medium-term EMA (50-day EMA).

This positioning suggests strength in its upward movement.

“The Relative Strength Index (RSI) is standing at 54.22 with a positive crossover, indicating increasing buying momentum. If UPL sustains above the 575 level, it could potentially move towards upside targets of Rs 600 and Rs 615,” Matalia added.

Matalia also pointed out that the option data reveals the highest concentration of open interest in put options at the 550 and 530 strike prices, suggesting that these levels could serve as immediate support. Conversely, the highest open interest in call options is located at the 570 and 580 strike prices, indicating potential resistance at these levels.

“A decisive break above this resistance zone could lead to short-covering, further accelerating the stock’s upward momentum,” he said.

Given this placement of the action, the analyst suggests implementing a Bullish Option Buy Spread at UPL to benefit from its potential promotion:

Bullish Option Buy Spread

A bullish call spread is an options trading strategy that involves two call options. It is typically used when a trader expects a moderate increase in the price of the underlying asset.
The strategy involves buying a call option at a lower strike price and selling another call option at a higher strike price, with both options having the same expiration date. The goal is to profit from an increase in the price of the underlying asset, while limiting both potential gains and potential losses.

(Prices as of August 19)

Below is the strategy results chart:

(Source: Choice Broking)

(Disclaimer:The recommendations, suggestions, views and opinions of the experts are their own and do not represent the views of The Economic Times.