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Nifty support at 15500 on monthly F&O expiry, Bank Nifty to remain flat-to-negative; use Put Ladder for gains

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

Nifty 50, bank nifty
The strategy which we are suggesting for the weekly expiry scheduled on 7th July is PUT LADDER

By Rajesh Palviya

In the Nifty current series there has been a Long Unwinding witnessed with decrease in price of -2.40% and decrease in OI by -52%  as of Wednesday wherein there was unwinding of 58.14 lakh shares in OI, decreasing from 112.81 lakh to 54.62 lakh shares ahead of monthly expiry scheduled on Thursday. Nifty current month rollover stands at 63%, while Nifty Put Call Ratio, a sentiment indicator used by traders to gauge the market sentiment and mood, is currently at 1.05 compared to 1.03 of last week, indicating a flat-to-positive movement for expiry.

India Vix, a market volatility indicator often called the fear gauge, is currently trading 21.90% compared to 20.88% of last week. Implied Volatility of Nifty ATM options for the current series is at 21.87% in contrast to 21.41% of last week, indicating volatile movement on either side in the expiry 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 16,000 followed by 16,100 & 15,900 witnessed significant OI concentration and may act as resistance for current expiry. Options data suggest an immediate trading range between 15,600 and 16,000 levels. In Nifty Call writing was witnessed at 16,000 , 16,100 & 15,900 ;while on Put side it was seen at 15,700 & 15,600.

Nifty Open Interest concentration

Nifty Option OI Change

Bank Nifty Outlook 

In current series there has been a Long Unwinding witnessed in Bank Nifty Fut with an decrease in price of -5.38% and decrease in OI by -60% as of Wednesday wherein there was unwinding of 14.18 lakh shares in OI, decreasing from 23.79 lakh to 9.61 lakh shares. Bank Nifty Current series rollover stands at 65%, while Bank Nifty Put Call Ratio is currently at 0.76 compared to 0.86 of last week indicating flat-to-negative movement for expiry.

Bank Nifty Put options OI distribution shows that 33,000 has highest OI concentration followed by 32,500 & 32,000 which may act as support for current expiry and on the Call front 34,000 followed by 34,500 & 33,500 witnessed significant OI concentration and may act as résistance. Options data indicated an immediate trading range between 32,500 and 34,000 levels.

On a weekly basis Significant Call writing in Bank Nifty was seen at 34,000 ,33,800 & 33,500 strike while on put side it was seen at  33,000, 32,800 & 33,300.

Bank Nifty Open Interest Concentration

Bank Nifty Option OI Change

NSE Nifty 50 trading strategy for 7th July weekly expiry

The strategy which we are suggesting for the weekly expiry scheduled on 7th July is PUT LADDER, which involves buying of one lot of Nifty 15,800 PUT @ 213 & selling of one lot each of 15,600 PUT @ 131 & one lot of 15,400 PUT @ 76. The maximum profit of Rs 9,700 will be attained at 15,600 levels, while strategy will start making loss below 15,200. The cost of the strategy involves a marginal outflow is Rs 300, which is the maximum loss if Nifty closes & remains above 15,800 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 15,200. Break Even points of the strategy are 15,794 on upside & 15,194 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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