F&O expiry: Nifty to trade in 18000-18400, OI signals support at 40000 for Bank Nifty; check trading strategy

October 28, 2021 8:32 AM

Nifty Put options OI distribution shows that 18,000 has highest OI concentration followed by 18,200 & 18,100 which may act as support for current expiry

Nifty, bank nifty, stock marketNifty continues to remain in an uptrend in the medium term, so buying on dips continues to be our preferred strategy

By Rajesh Palviya

In the current series of Nifty 50, a short covering has been witnessed with an increase in price of 3.36% and a decrease in OI by -60% as of Wednesday, wherein there was the unwinding of 69.70 lakh shares in OI, decreasing from 116.52 lakh to 46.82 lakh shares amid monthly expiry scheduled on Thursday. The Nifty October rollover stands at 64.27% as of Wednesday compared to 57.73% on the same day of previous expiry. The Market-wide October rollover stands at 74.23% as of Wednesday as compared to 72.46% on the same day of the previous expiry.

The rollover cost in the October series stands at 0.16 as of Wednesday compared to 0.14 on the same day of previous expiry. Nifty Put Call Ratio, a sentiment indicator used by traders to gauge the market sentiment and mood, is currently at 0.86 compared to 0.92 of last week, indicating flat-to-positive bias.

India VIX, a market volatility indicator often called the fear gauge, is currently trading 16.83% compared to 18.03% of last week. Implied Volatility of Nifty ATM options for the current series is at 17.01% in contrast to 16.99% of last week, indicating flat-to-low volatile movement on either side in expiry session.

Nifty Put options OI distribution shows that 18,000 has highest OI concentration followed by 18,200 & 18,100 which may act as support for current expiry and on the Call front 18,300 followed by 18,400 & 18,500 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 18,300 & 18,350 while on the Put side noticeable activity of writing was witnessed in 18,000 & 18,100 strike prices. Options data suggest an immediate trading range between 18,000 and 18,400 levels.

Nifty Open Interest Concentration

Nifty Open Interest Change

Bank Nifty Outlook

In the current series, a short covering has been witnessed in Bank Nifty Futures with a increase in price of 8.88% and decrease in OI by -41% as of Wednesday wherein there was unwinding of 8.60 lakh shares in OI, decreasing from 20.95 lakh to 12.34 lakh shares amid monthly expiry scheduled on Thursday. Bank Nifty October rollover stands at 56.28% as of Wednesday compared to 65.47% on the same day of previous expiry which is lower than its three months average of 63.95% and lower than its six months average of 58.96% as of Wednesday. Bank Nifty Put Call Ratio, a sentiment indicator used by traders to gauge the market sentiment and mood, is currently at 0.77 compared to 1.03 of last week indicating flat-to-positive bias.

Bank Nifty Put options OI distribution shows that 40,000 has highest OI concentration followed by 40,500 & 41,000 which may act as support for current expiry and on the Call front 41,500 followed by 42,000 & 41,000 witnessed significant OI concentration and may act as resistance; while 41000 is likely to act as a pivotal level.

In the weekly options Call writing seen at 41,300, 41,500 & 41,200 strike while on the put side it was seen at 41,000 , 40,500 & 40,000 Options data indicated an immediate trading range between 40,000 and 41,500 levels.

Bank Nifty Open Interest concentration

Bank Nifty Open Interest Change

Nifty 50 trading strategy for F&O expiry day

The strategy which we are suggesting for the weekly expiry is a Bearish strategy namely PUT LADDER, which involves Buying of one lot of Nifty 18,250 PUT @ 82 & selling of one lot each of 18,150 PUT @ 41 & one lot of 18,050 PUT @ 17. We have observed that the high OI concentration on the PUT side prevails in the above-mentioned strike price and to take the advantage of the same at a low cost, we are suggesting this strategy.

The maximum profit of Rs 3,800 will be attained at 18,150 levels, while strategy will start making loss below 17,930. The cost of the strategy involves an outflow of Rs 1,200 which is the maximum loss if Nifty trades & remains above 18,225 levels, however below 17,930 it’s advisable to exit the strategy in total to avoid unlimited losses. Break Even points of the strategy are 18,226 on Upside & 17,926 on the lower side.

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

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