Hope you all are doing good. In this weekly analysis post, we try to analyse Nifty & Banknifty based on charts and making our Monthly Income strategies. These Option strategies required basic knowledge of Option Greeks and required some adjustments too if we get a wild movement. So try to learn the basics first and trade along with experts in starting. Slowly you will learn these things and can generate a good return by your own with full protection of your capital.
Here one thing we need to keep in mind that as a full-time trader, Capital protection must be our priority. Read this article and I will share a golden rule at the end of this article because every time I create a strategy I’m keeping this thing in my mind. Let’s Start our weekly analysis Of Nifty & BankNifty…..
This week we saw a good upside movement in Nifty on Tuesday and Wednesday but later on Thursday, it faced resistance around 61.8% retracement levels. As m following Fibonacci more closely, I observed 50%-61.8% is reversal zone for nifty. It always faces huge pressure between these levels. In my every post I always say that We can’t expect much higher levels in Nifty until it is trading below 61.80% retracement level. The Same thing i shared on my twitter handle on Thursday. If you observe you can easily spot that same thing Nifty did in February When it took resistance at 61.8% Level and after that made a low of 10604.35. Now question is “Can we expect same downside movement this time too?” Now Look at the chart, In February, After took resistance at 61.8% Level, We got a big bear candle on Friday closing but this time we got a Doji type candle, Which means Buyers & Sellers both are strong this time and No one is ready to lose. That’s the reason we don’t have any clear indication for further movement. But Nifty need to be close and sustain above that 61.8% level, then only we can say that Bull Phase has started in Nifty. Till than either we might see a range bound movement or Nifty can test 10900 & 10700 Levels again in coming sessions.
Now look at the Month Option Chain, Highest Open Interest stands at 11500 CE & 11000 PE followed by 11300 CE & 10800 PE. PCR stands at 1.30 which is an overbought level. On the downside, PCR at 11000 stands at 1.81 which is acting a support level until PCR stands above 1.80. Need to track closely if PCR at 11000 level is coming down then we can get a breakdown from 11000 level and then 10800 will act as the next support for Nifty. On the upside, PCR at 11100 stands at 0.48 which is acting a resistance based on current data. For PCR you can refer to our previous post.
Strategy for the coming week: Call Ration Spread
Capital required of this strategy around 3.5 lakh. and max return will be around 4%. The loss will start only above 11333. You can close this strategy or can do some adjustments. Possible adjustments: Whenever Nifty hit 11200 Level, Square Off 11200 CE and short 11400 CE. Same thing you have to do with 11300. Nifty Hit 11300, Square off 11300 CE and sell 11500 CE.
BankNifty IDX: 27761.80
We saw a good upside movement in BankNifty this week because of good support from PSU Banks. BankNifty is in a complete bull trend. Facing some resistance around the previous high at 27754.45. If we got a breakout from here than the next target will be 28300-28400. So can Initiate a fresh long possible after we get a breakout from this level. As the general election is near, so don’t forget about the volatility. Volatility will be very high in so better make a good risk management plan for this event and than only initiate a position.
Based on Monthly option chain data, Highest Open Interest stands at 28000 CE & 27000 CE followed by 28500 CE & 26500 PE. The range is a little wide. PCR stands at 1.37. On the Upside, PCR at 28000 stands at 0.41 which is acting a short term resistance level. On the downside, PCR at 27000 stands at 1.81, which is acting a support level for this expiry.
If we are looking at this Monthly data, We found than upside range is small but downside range is little wide, which is giving a cautious signal that we need to be little more active in coming sessions. because downside movement is always faster than upside movement. so always keep a backup plan ready for any sudden opposite movement.
Strategy for the coming week: Call Ration Spread
Capital required for this strategy is around 2.20 lakh. And max return is around 5%. 28537 is our breakeven. Possible Adjustments: You can do the same adjustments as we are doing in Nifty. Banknifty Hit 28200, Square off 28200 CE and sell 28600 CE. Keep 27800 CE as it is.
Now, what is the golden rule, Which we are talking about in starting?
As you all know that downside movement is much faster than upside movement. so whenever you are going to initiate a strategy, always keep in mind that your downside risk should be capped. You can easily adjust in upside movement but downside movement will not give you any chance so always keep your capital protected with this type of movement Because only one wrong move will kick out completely from this market. That’s the reason I always avoid PUT RATIO SPREAD like strategies where downside risk is unlimited.
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DISCLAIMER: – we are not a SEBI research analyst. Views posted here only for educational purposes. There is no liability whatsoever for any loss arising from the use of this product or its contents. This product is not a recommendation to buy or sell, but rather a guideline to interpreting specified analysis methods. This information should only be used by investors and traders who are aware of the risk inherent in securities trading.
8+ Years working as a derivative trader, Option Writer, Blogger, Trader by passion, Keen Follower of Indian share market