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Nifty support at 16500, Bank Nifty to remain flat-to-positive; use call ladder in Nifty for 4th Aug F&O expiry

Nifty Put options OI distribution shows that 16,500 has highest OI concentration followed by 16,300 & 16,400 which may act as support for current expiry

Nifty support at 16500, Bank Nifty to remain flat-to-positive; use call ladder in Nifty for 4th Aug F&O expiry
The strategy which we are suggesting for this weekly expiry dated 04th August is a Moderately Bullish strategy

By Rajesh Palviya

In Nifty current series there has been a Short Covering witnessed with increase in price of 5.77% and decrease in OI by  54% as of Wednesday, wherein there was unwinding of 60.75 lakh shares in OI, decreasing from 112.89 lakh to 52.14 lakh shares ahead of the monthly expiry. Nifty current month rollover stands at 56% as of Wednesday, while Nifty Put Call Ratio, a sentiment indicator used by traders to gauge the market sentiment and mood, is currently at 1.24 compared to 1.41 of last week, indicating a flat-to-positive movement for expiry.

The Nifty July rollover stands at 56.02% on Wednesday compared to 63.36% on the same day of previous expiry. The Market wide July rollover stands at 72.21% on Wednesday as compared to 72.92% on the same day of previous expiry. The rollover cost in the July series stands at 0.15 on Wednesday compared to 0.01 on the same day of previous expiry.

The Nifty July rollover is lower than its three months average of 64.84% and higher than its six months average of 62.66% as on today. The market wide rollover is lower than its three months average of 73.58% and lower than its six months average of 72.89%. India Vix, a market volatility indicator often called the fear gauge, is currently trading 18.13% compared to 16.86% of last week.

Implied Volatility of Nifty ATM options for the current series is at 18.96% in contrast to 16.76% of last week, indicating Low-to-narrow movement on either side in the expiry session. Nifty Put options OI distribution shows that 16,500 has highest OI concentration followed by 16,300 & 16,400 which may act as support for current expiry and on the Call front 16,900 followed by 16,700 & 16,800 witnessed significant OI concentration and may act as resistance for current expiry. Options data suggest an immediate trading range between 16,850 and 16,400 levels and 16,600 acting as pivotal level.

Nifty Open Interest Concentration

Nifty Option OI Change

Bank Nifty Outlook

In current series there has been a Short Covering witnessed in Bank Nifty Fut with an increase in price of 10% and decrease in OI by 39% as of Wednesday, wherein there was unwinding of 8.66 lakh shares in OI, decreasing from 22.34 lakh to 13.68 lakh shares. Bank Nifty Current series rollover stands at 51% as of Wednesday, while Bank Nifty Put Call Ratio is currently at 1.21 compared to 1.10 of last week indicating flat-to-positive movement for expiry.

Bank Nifty July rollover stands at 50.64% on Wednesday compared to 64.88% on the same day of previous expiry which is lower than its Three months average of 63.82% and lower than its six months average of 64.69%

Bank Nifty Put options OI distribution shows that 36,000 has highest OI concentration followed by 36,500 & 36,300 which may act as support for current expiry and on the Call front 37,000 followed by 37,500 & 38,000 witnessed significant OI concentration and may act as resistance. Options data indicated an immediate trading range between 36,200 and 37,300 levels. On a weekly basis Significant Call writing in Bank Nifty was seen at 38,000 ,37,000 & 37,500 strike while on put side it was seen at  36,500, 36,300 & 30,000.

Bank Nifty Open Interest Concentration

Bank Nifty Option OI Change

NSE Nifty 50 trading strategy for 4th August F&O expiry

The strategy which we are suggesting for this weekly expiry dated 04th August is a Moderately Bullish strategy called as CALL LADDER, which involves buying of one lot of Nifty 16,650 Call @ 184 & selling of one lot of 16,850 Call @ 81 & one lot of 17,050 Call @ 41. The cost of the strategy involves outflow of Rs 2,400 which is the maximum loss if Nifty trades, and remains below 16,700 levels on expiry. On expiry the maximum profit of Rs 7,600 will be attained above 16,850 levels, while strategy will start making loss if Nifty crosses 17,202, hence it’s advisable to exit the strategy in total to avoid unlimited losses above 17,150. Break Even points of the strategy are 16,698 on down side & 17,202 on the upside.

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

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