F&O expiry: Nifty to trade in 16800-17200, OI signals support at 35000 for Bank Nifty; check trading strategy

Options data suggest an immediate trading range for Nifty 50 index between 17,200 and 16,800 levels

Nifty, Bank Nifty, stock markets
Nifty Put Call Ratio, a sentiment indicator used by traders to gauge the market sentiment and mood, is currently at 1.01 compared to 1.03 of last week, indicating flat-to-positive bias. Image: Reuters

By Rajesh Palviya

In the Nifty current series, there has been a Long Unwinding witnessed with a decrease in price of (-3.50%) and decrease in OI by (-7.84%) as of Wednesday wherein there was shedding of 8.22 lakh shares in OI, decreasing from 104.84 lakh to 96.62 lakh shares. Nifty current series rollover stands at 15.39%, while Nifty Put Call Ratio, a sentiment indicator used by traders to gauge the market sentiment and mood, is currently at 1.01 compared to 1.03 of last week, indicating flat-to-positive bias.

India Vix, a market volatility indicator often called the fear gauge, is currently trading 16.58% compared to 15.90% of last week. Implied Volatility of Nifty ATM options for the current series is at 17.43% in contrast to 16.11% of last week, indicating low volatile movement on either side in the expiry session.

Nifty Put options OI distribution shows that 16,800 has highest OI concentration followed by 16,900 & 16,700 which may act as support for current expiry and on the Call front 17,200 followed by 17,300 & 17,100 witnessed significant OI concentration and may act as resistance for current expiry.

In the weekly options there was Call writing seen at 17,200 strike followed by 17,100 & 17,000 while on the Put side noticeable activity of writing was witnessed in 16,900 & 16,800 strike prices. Options data suggest an immediate trading range between 17,200 and 16,800 levels.

Nifty Open Interest Concentration

Nifty Open Interest Change

Bank Nifty Outlook

In current series there has been a short addition witnessed in Bank Nifty Futures with a decrease in price of (-6.51%) and increase in OI by 2.05% as of Wednesday wherein there was addition of 0.47 lakh shares in OI, increasing from 22.96 lakh to 23.43 lakh shares. Bank Nifty current series rollover stands at 14.81%, while Bank Nifty Put Call Ratio, a sentiment indicator used by traders to gauge the market sentiment and mood, is currently at 0.83 compared to 0.64 of last week indicating flat-to-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 34,000 followed by 34,500 witnessed significant OI concentration and may act as resistance.

In the weekly options Call writing seen at 36,500, 36,000 & 35,500 strike while on the put side it was seen at 34,000, 34,500 & 34,800. Options data indicated an immediate trading range between 36,000 and 34,000 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 Bullish strategy with reduced premium outflow and lower break even point called BULL CALL SPREAD of 23rd December expiry wherein trader can buy one lot of 16,950 call strike @ 66 and simultaneously sell one lot of 17,100 call strike @ 13, so that net outflow or maximum loss will be restricted to up to Rs 2,650. If Nifty on expiry closes above 17,003 the strategy will start making profit, however, as the risk is limited so is the profit also limited. The maximum gains will be restricted up to Rs 4,850 only because the gains of long 16,950 strike call will be offset by the sold 17,100 strike call if Nifty closes above 17,100 on expiry.

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

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