Technical Strength, Rising Open Interest and Positive Momentum Prompt Brokerage to Recommend Defined-Risk F&O Trades

HDFC Securities has recommended Bull Call Spread option strategies on MidCap Nifty and Bajaj Finance, citing improving technical indicators, sustained buying momentum, and fresh long positions in the derivatives market. The brokerage believes both the broader mid-cap index and the leading NBFC stock are well-positioned for a gradual upside in the current July derivatives series.

With Indian benchmark indices hovering near record highs and market sentiment remaining positive, analysts expect selective participation in sectors such as financial services and mid-cap stocks to continue. The suggested option strategies are designed to allow traders to participate in the potential upside while maintaining a predefined level of risk.

Bull Call Spread: A Defined-Risk Strategy

A Bull Call Spread is one of the most commonly used options strategies for traders expecting a moderate rise in the price of a stock or index.

The strategy involves:

• Buying a call option at a lower strike price.

• Simultaneously selling another call option at a higher strike price with the same expiry.

This reduces the overall premium paid while limiting both maximum profit and maximum loss. Compared to purchasing a naked call option, the strategy offers better capital efficiency and lower risk, making it suitable for traders who expect a controlled upward movement rather than a sharp rally.

MidCap Nifty Strategy

Trade Setup

HDFC Securities recommends the following July expiry strategy:

• Buy: MidCap Nifty 14,900 Call

• Sell: MidCap Nifty 15,000 Call

• Expiry: July 28

• Lot Size: 120

Expected Outcome

• Maximum Profit: ₹7,680

• Maximum Loss: ₹4,320

• Breakeven: 14,936

• Risk-Reward Ratio: 1:1.78

• Approximate Margin Requirement: ₹35,000

The strategy delivers maximum profit if the MidCap Nifty settles at or above 15,000 on expiry, while losses remain limited if the index closes below 14,900.

Why HDFC Securities Is Positive on MidCap Nifty

According to the brokerage, derivatives positioning indicates fresh bullish participation in the MidCap Nifty.

Several technical factors support this view:

Fresh Long Build-Up

Open Interest has increased alongside a 2.5% rise in prices during the July derivatives series, indicating fresh buying activity rather than short covering.

Strong Price Structure

The index continues to trade above key short-term moving averages, suggesting buyers remain in control of the trend.

Higher High–Higher Low Formation

Monthly charts continue to display a classic bullish pattern, reflecting sustained upward momentum over multiple timeframes.

Positive RSI Momentum

The Relative Strength Index (RSI) remains above 60 on both weekly and monthly charts, a level generally associated with strong bullish momentum.

Bajaj Finance Strategy

Trade Setup

For Bajaj Finance, HDFC Securities recommends another Bull Call Spread.

• Buy: Bajaj Finance ₹1,050 Call

• Sell: Bajaj Finance ₹1,080 Call

• Expiry: July 28

• Lot Size: 750 shares

Expected Outcome

• Maximum Profit: ₹16,088

• Maximum Loss: ₹6,412

• Breakeven: ₹1,058.55

• Risk-Reward Ratio: 1:2.51

• Approximate Margin Requirement: ₹27,000

This strategy generates its maximum return if Bajaj Finance closes at or above ₹1,080 on expiry while keeping downside risk limited.

Technical Signals Favour Bajaj Finance

The brokerage believes Bajaj Finance has entered another phase of technical strength supported by both price action and derivatives data.

Long Build-Up in Futures

The stock has witnessed an increase in both price and open interest, suggesting fresh buying positions are being created.

Trading Above Key Moving Averages

Bajaj Finance is currently trading above its 5-day and 20-day Exponential Moving Averages (EMA), confirming positive short-term momentum.

Trendline Breakout

The stock has successfully broken above a downward-sloping resistance trendline, often viewed as an early indication of trend reversal.

Strong Momentum Indicators

RSI remains above 60 on both daily and weekly charts, reinforcing the strength of the ongoing uptrend.

Financial Stocks Continue to Lead Market Rally

Financial services have remained among the strongest-performing sectors in the Indian equity market this year.

Banks, NBFCs, insurance companies, and asset management firms continue to benefit from:

• Healthy credit demand

• Stable asset quality

• Strong retail lending

• Rising financial inclusion

• Robust earnings growth

Bajaj Finance, in particular, remains one of the market's preferred NBFCs due to its diversified lending portfolio, digital capabilities, and consistent profitability.

Mid-Cap Segment Remains in Focus

Despite periodic volatility, India's mid-cap segment continues to attract investor interest.

Analysts believe mid-cap companies are benefiting from:

• Strong domestic economic growth

• Rising capital expenditure

• Manufacturing expansion

• Infrastructure development

• Increasing retail participation

The improving earnings outlook for mid-cap companies has supported sustained institutional buying, making MidCap Nifty one of the strongest-performing market segments.

Risk Management Remains Important

Although both strategies offer defined downside risk, traders should remember that options trading involves leverage and time decay.

Market participants should closely monitor:

• Global market movements

• FII activity

• Corporate earnings

• Interest rate expectations

• Overall market volatility

Any unexpected event could affect option premiums before expiry.

Brokerage Trading Advice

HDFC Securities advises traders not to wait until expiry if the strategy generates satisfactory returns.

The brokerage recommends booking profits once the Return on Investment (ROI) exceeds 20%, allowing traders to lock in gains while reducing exposure to sudden market reversals.

Investor Takeaway

HDFC Securities' latest derivatives recommendations reflect growing confidence in both MidCap Nifty and Bajaj Finance, supported by favourable technical indicators, rising open interest, and strengthening price action.

The Bull Call Spread strategies provide traders with a disciplined approach to participating in potential market gains while maintaining limited downside exposure. For investors with a moderately bullish outlook on Indian equities, particularly in the financial and mid-cap segments, these strategies offer an attractive balance between risk and reward. However, given the inherent volatility of the derivatives market, disciplined position sizing and prudent risk management remain essential for successful trading.