F&O expiry day: Go for Bull Call Spread on Nifty for more upside, call ladder strategy for Bank Nifty bulls

Nifty Put options OI distribution shows that 18,000 has highest OI concentration followed by 18,100 and 17,900 which may act as support for current expiry

Nifty, Bank Nifty, option trading
Options data suggest an immediate trading range between 18,400 and 18,000 levels

By Rajesh Palviya

In the Nifty 50 current series, a Long addition has been witnessed with an increase in price of 5.64% and increase in OI by 4.38% as of Wednesday wherein there was addition of 4.20 lakh shares in OI, increasing from 96.04 lakh to 100.24 lakh shares. Nifty current series rollover stands at 11.65% as of Wednesday, while Nifty Put Call Ratio, a sentiment indicator used by traders to gauge the market sentiment and mood, is currently at 1.45 compared to 1.36 of last week, indicating positive bias with cautious approach.

India VIX, a market volatility indicator often called the fear gauge, is currently trading 17.18% compared to 17.98% of last week. Implied Volatility of Nifty ATM options for the current series is at 16.07% in contrast to 17.62% of last week, indicating low volatile movement on both the sides in the expiry session.

Nifty Put options OI distribution shows that 18,000 has highest OI concentration followed by 18,100 and 17,900 which may act as support for current expiry and on the Call front 18,500 followed by 18,300 and 18,400 witnessed significant OI concentration and may act as resistance for current expiry.

In weekly options there was Call writing seen at 18,500 strike followed by 18,400 and 18,200 while on the Put side noticeable activity of writing was witnessed in 18,000 and 18,100 strike prices. Options data suggest an immediate trading range between 18,400 and 18,000 levels.

Nifty OI Concentration

Nifty OI Change

Bank Nifty Outlook

In current series, there has been a long addition witnessed in Bank Nifty Futures with an increase in price of 10.34% and increase in OI by 5.41% as of Wednesday wherein there was addition of 1.25 lakh shares in OI, increasing from 22.89 lakh to 24.13 lakh shares. Bank Nifty current series rollover stands at 7%, while Bank Nifty Put Call Ratio, a sentiment indicator used by traders to gauge the market sentiment and mood, is currently at 0.99 compared to 0.92 of last week indicating caution at higher levels.

Bank Nifty Put options OI distribution shows that 38,500 has highest OI concentration followed by 38,000 and 37,500 which may act as support for current expiry and on the Call front 39,000 followed by 40,000 witnessed significant OI concentration and may act as resistance.

In weekly options Call writing seen at 38,700, 38,800 and 39,000 strike while on the put side it was seen at 38,500 and 38,000. Options data indicated an immediate trading range between 39,000 and 38,000 levels.

Bank Nifty Open Interest concentration

Bank Nifty OI Change

Nifty 50 trading strategy for weekly F&O expiry day

Traders can initiate a Moderately Bullish strategy with reduced premium outflow & lower breakeven point called BULL CALL SPREAD of 13th January expiry wherein trader will buy one lot of 18,200 call strike @ 67 and simultaneously sell one lot of 18,350 call strike @ 12, so that net outflow or maximum loss will be restricted to up to Rs 2,750. If Nifty on expiry day closes above 18,255, the strategy will start making profit, however, as the risk is limited so is the profit also limited. The maximum gains will be restricted up to Rs 4,750 only, because the gains of a long 18,200 strike call will be offset by the sold 18,350 strike call if Nifty closes above 18,350 on expiry.

Bank Nifty trading strategy for weekly F&O expiry day

The strategy which we are suggesting for this weekly expiry dated 13th January is a Bullish strategy called as CALL LADDER, which involves Buying of one lot of Bank Nifty 38,700 Call @ 221 & selling of one lot each of 39,000 Call @ 88 & one lot of 39,300 Call @ 26. The cost of the strategy involves outflow of Rs 2,675 which is the maximum loss if Bank Nifty trades & remains below 38,800 levels on expiry .The maximum profit of Rs 4,825 will be attained at 39,000 levels, while strategy will start making loss above 39,500. Call Ladder although being a limited profit & unlimited risk strategy; is an extension to the bull call spread and to further bring down the cost of the premium one more extra leg of OTM call is sold and hence any move above the sold leg can incurred unlimited loss, hence it’s advisable to exit the strategy in total to avoid unlimited losses above 39,500. Break Even points of the strategy are 39,493 on Upside & 38,807 on the lower side.

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

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