By Rajesh Palviya
Nifty witnessed a Short Build in the current series with decrease in price of -0.51% and increase in OI by 4.49% till today wherein there was addition of 4.37 Lac shares in OI, increasing from 97.22lac to 101.59Lac shares. Nifty July rollover stands at 5% till yesterday, while provisional data for today indicate approximately 5%. Nifty Put Call Ratio a sentiment indicator used by traders to gauge the market sentiment and mood, is currently at 0.90 compared to 1.21 of last week, indicating positive bias.
India Vix, a market volatility indicator often called the “fear gauge“ is currently trading 13.05% compared to 15.10% of last week. Implied Volatility of Nifty ATM options for the current series is at 12.50% in contrast to 15.20% of last week, indicating Low volatile movement on either side in coming session.
Nifty Put options OI distribution shows that 15,500 has highest OI concentration followed by 15,600 & 15,700 which may act as support for current expiry and on the Call front 15,900 followed by 15,800 & 16,000 witnessed significant OI concentration and may act as resistance for current expiry.
In WEEKLY options there was Call writing seen at 15,900 strike followed by 15,800 while on the Put side noticeable activity of writing was witnessed in 15,600 & 15,500 strike prices. Options data suggest an immediate trading range between 15,600 and 15,900 levels.
Nifty Open Interest concentration
Nifty Open Interest Change
Strategy for Nifty – Ratio Spread
Nifty 15700 Put holds an Highest Open Interest Followed by 15500 & 15600 – which indicates an support near 15650 odd levels & on other hand 15900 & 16000 Call Holds an Highest Open Interest which indicates upside is capped near 15950 – 16000 level, observing the cues from option data we can interpret Nifty should expire in the range of 15650 to 15950 & hence we recommend Nifty Ratio Spread.
Where we suggest to buy ATM call option 15700 1 lot & sell OTM 15850 call Option 2 lot ( additional 1 lot of selling is to reduce the buy premium since it is OTM and if nifty doesn’t close above 15850 time value will erode eventually helping to reduce the buy premium by selling 1 extra leg)
Nifty Ratio spread
Buy 15700 CE x 1 Lot cmp 53
Sell 15850 CE x 2 Lot CMP 7
max downside loss Rs. -1946/-
Profit range 15750-15950, Maximum profit at 15850 of Rs 9305, Loss will start above 15950
Bank Nifty Outlook
In current series Bank Nifty witnessed short build up with a decrease in price of -0.18% and increase in OI by 20.29% ; wherein there was addition of 3.86Lac shares in OI, increasing from 19.04Lac to 22.90Lac shares till today. Bank Nifty May rollover stands at 4% till yesterday, while provisional data for today indicate approximately 4%. Bank Nifty Put Call Ratio a sentiment indicator used by Traders to gauge the market sentiment and mood is currently at 0.61 compared to 0.91 of last week indicating Positive bias.
Bank Nifty Put options OI distribution shows that 35,000 has highest OI concentration followed by 34,500 & 34,000 which may act as support for current expiry and on the Call front 35,000 followed by 35,500 & 36,000 witnessed significant OI concentration and may act as resistance.(35,000 pivotal level)
In WEEKLY options Call writing seen at 35,000, 35,200 & 35,300 strike while on the put side it was seen at 34,700, 35,000 & 34,000.Options data indicated an immediate trading range between 34,000 and 35,500 levels.
Banknifty Open Interest Concentration
Bank Nifty Option OI Change
Strategy for Bank Nifty – Ratio Spread
Bank Nifty 35000 Put holds the highest OI followed by 34500 & 34700 & currently we are exactly trading at support zone of 34750-700 level while on the Other Side 35000, 35500 & 36000 Call holds the Highest OI so to interpret 35000 levels will play a crucial role (Tug of war) & if we sustain above max level, rally/pullback can be witnessed till 35500 as per option data setup which means 35700 Call Premium will eventually erode to achieve our desire level of diminishing premium.
Buy 35000 CE X 1 LOT @ 65
Sell 35700 CE X 2 LOT @ 8
Net Outflow 49
Max downside loss – RS -1,225/-
Profit Range 35100 – 36300
Loss starts above 36300 Close only @ 36400 LOSS Rs -1225/- thereafter incremental loss.
(Rajesh Palviya is Vice President– Research (Head Technical & Derivatives) at Axis Securities Limited. The views expressed are the author’s own. Please consult your financial advisor before investing.)