I hope you are trading safe after a highly volatile weekly expiry. After gave a breakdown on 17th June, we saw a zigzag movement with very high momentum in Both the Indexes. Only your risk management will help to survive in this type of market. As there is lots of uncertainly in market due to globally and domestic concerns, I suggest we should focus more on limited risk strategies and keep aside unlimited risk strategies like short strangles/straddles for some time.
Weekly Analysis :
- We saw a sharp decline on Friday which lead to a breakdown on Monday from my suggested support levels. On Tuesday it took some halt and later a highly volatile sessions on Wednesday and Thursday which lead to nifty close at 11831.75 on Thursday.
- India’s benchmark 10 year bond yield dropped to it’s 20 Month low on Thursday after Fed Reserve hints possible rate cut later this year. On Wednesday said it was ready to fight with growing global & domestic economic risk with interest rate cut starting from next month due to rising trade tensions and weak inflation concerns.
- Global rating agency Moody’s downgrades Tata Motors with negative outlook due to concerns related to Jaguar Land Rover.
- On the sector front, NIFTY INFRA , NIFTY IT & NIFTY METAL are among the top gainers in last one month. On the other hand, NIFTY PHARMA, MEDIA & AUTO remains the top losers.
- FIIs are the net sellers in Cash market this week , sold around 1000 Cr in cash market. Where DIIs are the net buyer this entire week, bought around 2800 Cr in cash market.
Nifty chart this week :
- In my last Weekly analysis and Option Strategy report, I mentioned that 11800-11750 will act as a strong support and breakdown will lead to further levels.
- After gave a successful breakdown, we can see on Nifty Chart that Nifty is taking support around 11600 levels.
- There is a Gap between 11615-11415, which is still open and Nifty would try to fill this gap before its new upside journey. So keep this gap on your radar.
- Overall breath is looking week for short term prospective, and We can expect a high volatility in coming sessions. As market will focus on Budget session now. If Budget session is fails to cheers market then we can expect some lower levels on Nifty Chart from here. It can test 11400 or even 11000 too.
- Focus on fundamentally strong scripts right now. Mid caps and small caps are the most pain giver stocks from last 1.5 year. I suggest we should avoid these stocks if you can’t hold for long term. Large caps stocks should be your safe bet for short to medium term trading prospective.
Open Interest Analysis:
- Based on option chain data, the highest open interest stands at 12000 CE & 11700 PE followed by 11900 CE & 11500 PE. PCR of all strikes is 1.26 which is a slightly over bought zone. PCR at 11700 stands at 3.06 which is acting as an immediate support level, PCR at 12000 stands at 0.29 which is acting as an immediate resistance level. Equally, important indicator Option Pain is at 11800, indicating expiry at 11800. A shift in option pain will provide further levels.
- 11500 PUT also carries a huge open interest which is indicated one more important level so this week. So expected range based on current data should be 11500 – 12000. As you can see the range is quite big and the same movement we are getting in market, I suggest keep your positions with proper hedge and avoid short straddle/Strangles the week.
Nifty option Strategy : Iron Butterfly
Adjustments not required for this strategy. Just book loss and close this strategy once it breaches break even points. If you still want to do some adjustments just shift Call spread to 100 points down after a breakdown from 11700. Keep put spread as it is. Same thing you can do with put spread after a successful breakout from 11900.
Bank Nifty chart this week :
- As i shared in my previous Weekly post, that 30660 is a very strong and game changer support level. We can see on Bank nifty chart, BankNifty gave a breakdown on 14th June and made a low of 30222.85 on Tuesday.
- This week was highly volatile, and we saw some deep trouble for naked option writers for both the directions. Later on Thursday it recovered from lower levels and closed again above 30660 level.
- Nowadays there are lots of uncertainly in market due to globally and domestic concerns and now market will focus on budget session starting from 5th July.
- In the minutes of the Monetary policy committee, RBI too raised concerns about week domestic growth and lack of liquidity, which is creating pressure on Banking sector.
- The move we got on Thursday, what you think is it sustainable? Can we say it a Dead Cat Bounce?
- Now 30660 is already broken, there is a Gap between 30072-29480, which still need to fill. So now 30072-29480 is the important band need to keep on radar. If We get a breakdown from 29480 on Bank Nifty Chart, We may see some new lower levels in coming sessions.
- The movement we are getting nowadays in market is indicating something serious is happening in market. So for a cautious note keep your portfolios with a proper hedge.
BankNifty Open Interest Analysis:
- Based on option chain data, the highest open interest stands at 31000 CE & 30500 PE followed by 31500 CE & 30000 PE. PCR of all strikes stands at 0.91 which is a neutral zone. PCR at 30500 stands at 2.96, which is acting an immediate support zone. PCR at 31000 stands at 0.23 which is acting as an immediate resistance zone. Option pain stands at 31600, giving us expiry level. Keep tracking this option pain levels. Shift in option pain will give us new level for expiry.
Bank Nifty Option Strategy : Iron Butterfly
Adjustments not required for this strategy. Just book loss and close this strategy once it breaches break even points. If you still want to do some adjustments just shift Call spread to 200 points down after a breakdown from 30400. Keep put spread as it is. Same thing you can do with put spread after a successful breakout from 31000.
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8+ Years working as a derivative trader, Option Writer, Blogger, Trader by passion, Keen Follower of Indian share market