F&O expiry: Nifty to trade flat-to-negative, use Put Ladder strategy for gains; Bank Nifty support at 33000

Options data suggest an immediate trading range between 16,250 and 15,750 levels.

F&O expiry, monthly F&O expiry
India Vix a market volatility indicator often called the "fear gauge“ is currently trading 25.46% compared to 24.56% of last week

By Rajesh Palviya

In Nifty current series there has been a Long Unwinding witnessed with decrease in price of -4.22% and decrease in OI by 45% as on today ,wherein there was unwinding of 37.94 lakh shares in OI, decreasing from 85.15 lakh to 47.21 lakh shares and the significant unwinding in current series was due to monthly expiry scheduled tomorrow. Nifty current month rollover stands at 66% as on today, while Nifty Put Call Ratio a sentiment indicator used by traders to gauge the market sentiment and mood is currently at 0.73 compared to 0.80 of last week, indicating a flat-to-negative movement for expiry.

India Vix a market volatility indicator often called the “fear gauge“ is currently trading 25.46% compared to 24.56% of last week. Implied Volatility of Nifty ATM options for the current series is at 23.75% in contrast to 24.37% of last week, indicating lower Volatile movement on either sides in expiry session. Nifty Put options OI distribution shows that 16,000 has highest OI concentration followed by 15,700 & 15,800 which may act as support for current expiry and on the Call front 16,200 followed by 16,100 & 16,300 witnessed significant OI concentration and may act as resistance for current expiry. In WEEKLY options there was Call writing seen at 16,200 strike followed by 16,300 & 16,150 while on the Put side noticeable activity of writing was witnessed in 16,000 ,15,700 & 15,800 strike prices. Options data suggest an immediate trading range between 16,250 and 15,750 levels.

Nifty Open Interest Concentration

Nifty Option OI Change

Banknifty Outlook

In current series there has been a Long Unwinding witnessed in Bank Nifty Fut with an decrease in price of -5.85% and decrease in OI by 53% as on today, wherein there was unwinding of 13.44 lakh shares in OI, decreasing from 25.20 lakh to 11.76 lakh shares in current series and the significant unwinding was due to monthly expiry scheduled tomorrow. Bank Nifty Current series rollover stands at 60% as on today, while Bank Nifty Put Call Ratio a sentiment indicator used by traders to gauge the market sentiment, is currently at 0.79 compared to 0.67 of last week indicating Flat-to-Negative movement for expiry.

Bank Nifty Put options OI distribution shows that 34,000 has highest OI concentration followed by 33,00 & 33,500 which may act as support for current expiry and on the Call front 34,500 followed by 35,000 & 35,500 witnessed significant OI concentration and may act as resistance. In WEEKLY options Call writing seen at 34,500, 34,600 & 35,000 strike while on the put side it was seen at 34,000 , 34,200 & 33,500 Options data indicated an immediate trading range between 35,500 and 33,500 levels.

Banknifty Option OI Concentration

Banknifty Option OI Change

Nifty Strategy

The strategy which we are suggesting for the Weekly EXPIRY scheduled on 2nd June is a Bearish strategy namely PUT LADDER, which involves Buying of one lot of Nifty 16,000 PUT @ 221 & selling of one lot each of 15,700 PUT @ 115 & one lot of 15,400 PUT @ 56. 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 12,500 will be attained at 15,700 levels, while strategy will start making loss below 15,100. The cost of the strategy involves outflow is Rs 2,500, which is the maximum loss if Nifty closes & remains above 15,950 levels on expiry, however any sharper movement on lower side could result in losses and, as an extra put has been sold it’s advisable to exit the strategy in total to avoid UNLIMITED losses below 15,050. Break Even points of the strategy are 15,950 on Upside & 15,050 on the lower side.

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

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