F&O weekly expiry trading guide: use Bear Put Ladder strategy; check trading range, support, resistance

By Rajesh Palviya

In Nifty 50 current series, there has been a Short Covering witnessed with increase in price of 6.17% and decrease in OI by -3.21%  as of Wednesday wherein there was unwinding of 3.54 lakh shares in OI, decreasing from 110.40 lakh to 106.86 lakh shares. Nifty current month rollover stands at 36%, while Nifty Put Call Ratio, a sentiment indicator used by traders, to gauge the market sentiment and mood is currently at 0.85 compared to 1.33 of last week, indicating caution.

India Vix, a market volatility indicator often called the fear gauge, is currently trading 24.86% compared to 22.61% of last week. Implied Volatility of Nifty ATM options for the current series is at 25.78% in contrast to 23.72% of last week, indicating volatile movement on either side in the expiry session.

Nifty Put options OI distribution shows that 17,000 has highest OI concentration followed by 16,900 & 17,200 which may act as support for current expiry and on the Call front 17,500 followed by 17,400 & 17,300 witnessed significant OI concentration and may act as resistance for current expiry. 

In weekly options there was Call writing seen at 17,500 strike followed by 17,400 & 17,300 while on the Put side noticeable activity of writing was witnessed in 17,100 ,17,000 & 17,300 strike prices. Options data suggest an immediate trading range between 17,000 and 17,500 levels.

Nifty Open Interest Concentration 

Nifty Option OI Change 

Bank Nifty Outlook 

In current series there has been a Long Build Up witnessed in Bank Nifty Fut with an increase in price of 2.73% and increase in OI by 13% as on today, wherein there was addition of 2.67 Lac shares in OI, increasing from 20.57Lac to 23.53Lac shares. Bank Nifty Current series rollover stands at 64%, while Bank Nifty Put Call Ratio, a sentiment indicator used by traders, to gauge the market sentiment and mood is currently at 0.59 compared to 0.89 of last week indicating flat-to-negative bias.

Bank Nifty Put options OI distribution shows that 35,000 has highest OI concentration followed by 35,500 & 36,000 which may act as support for current expiry and on the Call front 37,000 followed by 36,500 & 36,800 witnessed significant OI concentration and may act as resistance.

In WEEKLY options Call writing seen at 36,800, 36,500 & 37,000 strike while on the put side it was seen at 35,000 , 35,500 & 36,000 Options data indicated an immediate trading range between 35,000 and 37,000 levels.

Bank Nifty Open Interest Concentration

Bank Nifty Option OI Change

Nifty 50 trading strategy for monthly F&O expiry

The strategy which we are suggesting for the monthly expiry scheduled on 31st March is a Bearish strategy namely PUT LADDER, which involves Buying of one lot of Nifty 17,300 PUT @ 263 & selling of one lot each of 17,000 PUT @ 154 & one lot of 16,700 PUT @ 84. Put Ladder is a limited profit & unlimited risk strategy; which is an extension to the Put spread and to further bring down the cost of the strategy (Net premium) one more extra leg of OTM PUT is sold and hence any move below the sold leg can incur unlimited loss.

The maximum profit of Rs 13,750 will be attained at 17,000 levels, while strategy will start making a loss below 16,400. The cost of the strategy involves outflow of Rs 1,250 if Nifty closes & remains above 17,250 levels on expiry, however any sharper movement on lower side could result in losses as an extra put has been sold; it’s advisable to exit the strategy in total to avoid UNLIMITED losses below 16,400. Break Even points of the strategy are 17,275 on Upside & 16,375 on the lower side.

(Rajesh Palviya, VP – Research (Head Technical & Derivatives), Axis Securities. Views expressed are the author’s own.)