F&O expiry: Nifty to trade in 17000-17300 range, Bank Nifty support at 34500; use Nifty Bear Put Spread

Options data suggest an immediate trading range for Nifty 50 index between 17,300 and 17,000 levels

Nifty, bank nifty, F&O expiry
Traders can initiate a Moderately Bearish strategy with reduced premium outflow & lower breakeven point called Debit Put Spread or Bear Put Spread

By Rajesh Palviya

In Nifty 50’s current series, a Long Unwinding has been witnessed with decrease in price of (-2.12%) and decrease in OI by (-54%)  as of Wednesday wherein there was shedding of 56.58 lakh shares in OI, decreasing from 104.84 lakh to 48.25 lakh shares ahead of monthly expiry scheduled on Thursday. Nifty current series rollover stands at 61% while Nifty Put Call Ratio, a sentiment indicator used by traders to gauge the market sentiment and mood, is currently at 1.19 compared to 1.11 of last week, indicating flat-to-positive bias.

The Nifty December rollover stands at 60.81% on Wednesday compared to 62.28% on the same day of previous expiry. The Market wide December rollover stands at 71.93% as of Wednesday as compared to 70.65% on the same day of previous expiry. The rollover cost in the December series stands at 0.28 on Wednesday compared to 0.23 on the same day of previous expiry.

India VIX, a market volatility indicator often called the fear gauge, is currently trading 16.36% compared to 15.82% of last week. Implied Volatility of Nifty ATM options for the current series is at 16.64% in contrast to 17.06% of last week, indicating low 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 & 17,100 which may act as support for current expiry and on the Call front 17,500 followed by 17,300 & 17,200 witnessed significant OI concentration and may act as resistance for current expiry.

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

Nifty Open Interest Concentration

Nifty Open Interest Change

Bank Nifty Outlook 

In current series, there has been a Long Unwinding witnessed in Bank Nifty Futures with a decrease in price of (-6.66%) and decrease in OI by 47%  as of Wednesday wherein there was unwinding of 10.68 lakh shares in OI, decreasing from 22.96 lakh to 12.27 lakh shares ahead of the monthly expiry scheduled on Thursday. Bank Nifty current series rollover stands at 58% while Bank Nifty Put Call Ratio, a sentiment indicator used by traders to gauge the market sentiment and mood, is currently at 0.72 compared to 0.78 of last week indicating  flat-to-positive bias.

Bank Nifty Put options OI distribution shows that 34,500 has highest OI concentration followed by 34,000 & 33,500 which may act as support for current expiry and on the Call front 35,500 followed by 36,000 witnessed significant OI concentration and may act as resistance.

In the monthly options, Call writing was seen at 35,500, 35,200 & 35,000 strike while on the put side it was seen at 34,000 & 34,500 Options data indicated an immediate trading range between 35,500 and 34,500 levels.

Bank Nifty Open Interest Concentration

Bank Nifty Open Interest Change

Nifty 50 trading strategy for F&O expiry day

Traders can initiate a Moderately Bearish strategy with reduced premium outflow & lower breakeven point called Debit Put Spread or Bear Put Spread for 30th December expiry wherein trader will buy one lot of 17,200 Put strike @ 49 and simultaneously sell one lot of 17,000 Put strike @ 10, so that net outflow or maximum loss will be restricted to up to Rs 1,950. If Nifty on expiry closes below 17,161, the strategy will start making profit, however, as the sell put will help to bring down the cost of Long Put making it a limited risk strategy profits will also be limited. The maximum gains will be restricted up to Rs 8,050 because the gains of long 17,200 strike Put will be offset by the sold 17,000 strike Put if Nifty closes below 17,000 on expiry.

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

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