F&O watch: Nifty support at 15,400-15,600; Bank Nifty remains neutral; check Nifty trading strategy

Weekly Option expiry traders can initiate market neutral strategy called Long Straddle

By Rajesh Palviya

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Nifty, Bank Nifty Outlook: In the current weekly series, Nifty has witnessed a Short Build Up with decrease in price of -1.23% and an increase in OI by 1.39% as of Tuesday wherein there was addition of 1.29 lakh shares in OI, increasing from 93.23 lakh to 94.53 lakh shares. Nifty July rollover stands at 13% as of Wednesday. Nifty Put Call Ratio, a sentiment indicator, used by traders to gauge the market sentiment and mood, is currently at 0.81 compared to 1.37 of last week, indicating neutral-to-positive bias. India VIX, a market volatility indicator often called the fear gauge, is currently trading 13.20% compared to 12.27% of last week. Implied Volatility of Nifty ATM options for the current series is at 13.94% in contrast to 12.13% of last week, indicating higher volatile movement on either side in the coming session.

Nifty Put options OI distribution shows that 15,500 has highest OI concentration followed by 15,600 and 15,400 which may act as support for current expiry and on the Call front 15,800, 15,900 and 15,700 witnessed significant OI concentration and may act as resistance for current expiry.

In weekly options, Call writing was seen at 15,700 strike followed by 15,800 while on the Put side noticeable activity of writing was witnessed in 15,500 and 15,600 strike prices. Options data suggest an immediate trading range between 15,500 and 15,800 levels.

Nifty OI Concentration

Nifty OI Change

Bank Nifty Outlook

In current series, a Short Build Up has been witnessed in Bank Nifty Futures with a decrease in price of -1.47% and increase in OI by 24.58% as of Tuesday; wherein there was addition of 4.56 lakh shares in OI, increasing from 18.54 lakh to 23.09 lakh shares till Tuesday. Bank Nifty July rollover stands at 13% till Tuesday. Bank Nifty Put Call Ratio, a sentiment indicator used by traders to gauge the market sentiment and mood, is currently at 0.53 compared to 1.03 of last week indicating neutral-to-negative bias.

Bank Nifty Put options OI distribution shows that 33,500 has highest OI concentration followed by 34,000 which may act as support for current expiry and on the Call front, 35,000 and 35,500 witnessed significant OI concentration and may act as resistance. In weekly options, Call writing was seen at 35,000, 34,500 and 34,600 strike, while on the put side it was seen at 33,500 and 34,500. Options data indicated an immediate trading range between 34,000 and 35,000 levels.

Bank Nifty OI Concentration

Bank Nifty OI Changes 

Strategy for trading Nifty 50

Weekly Option expiry traders can initiate market neutral strategy called Long Straddle; wherein traders need to buy one lot each of Nifty 15,650 Call at Rs 50 and 15,650 put at Rs 54 options to benefit from sharp movement on either side after a holiday so that gains can be garner as long as the market moves, irrespective of its direction. The total premium outflow will be of Rs 7,800 (50 +54 =104 points) and break even point will be 15,754 on the upside and lower break even point will be 15,546 while if there is no movement and Nifty trades in range of 104 points, then the maximum loss will be restricted to the premium paid of Rs 7,800.

And another strategy which traders can opt for keeping bearish bias will be to Buy Nifty at the money 15600 Put at Rs 36 wherein maximum loss will be restricted to Rs 2,700 which is the premium amount paid and the gains can be unlimited below the break even point of 15,564.

(Rajesh Palviya is Vice President– Research (Head Technical & Derivatives) at Axis Securities Limited. The views expressed are the author’s own. Please consult your financial advisor before investing.)