Weekly Analysis and Option Strategy For 19th -26th July 2019

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Hello friend, How’s your trading going? This week Market was traded in a range, but the movement was little high, which creates some problems to unlimited risk strategies like a short straddle or strangle. One thing I told many times in my previous weekly analysis and Option strategy post that Market Always trade against the noise. Nowadays we can see lots of immature traders are coming to initiate short straddles and strangles, thinking that both the strikes will become zero, but when we see these wild moves, these trades book loss in panic. Once they book loss market return to its original range.

See what I want to say is, no strategy will work all the time. You have to make a strategy based on market conditions, Volatility, range, and trend. So just sell OTM call & put not enough, we have to learn how to analyze the market first. My suggestion is: Give some time to market, Try to analyze how the market behaves. Start with some limited risk strategies and then finally came to unlimited risk strategy. These strategies should be your last stage.

Nifty Weekly analysis and Option strategy

Nifty Chart this week:

Nifty Chart today

After taking support around 11500 on 10th July we saw some good recovery from lower levels. I’m following the Fibonacci tool from my initial days and I found that 50%-61.8% is the most important reversal zone. Same thing we can see on 18th – 19th June & again on 16th – 17th July. On Friday we saw a sharp decline in Nifty.  nifty is trying to break it’s a most important trendline support level.

Now 11500 -11450 is very important zone if manage to sustain below this zone then we may see some more downside levels. I shared in my last weekly post that upside is limited but the downside is totally open so hold your positions with a proper hedge. Once we get a breakdown from 11450 next targets should be 11355 & 11155.  An important reason for this continuous fall is continuous selling by FIIs. FIIs sold around 4000 cr in Cash in last one week. which is a very bearish sign. My suggestion is, keep your positions with a hedge and avoid any unlimited risk strategies if you don’t know how to manage your trade.


Open Interest Analysis:

Based on option chain data, the highest open interest stands at 11600 CE & 11500 PE followed by 11700 CE & 11300 PE. PCR of all strikes is 0.75 which is a neutral zone. PCR at 11400 stands at 6.98 which is acting as an immediate support level, PCR at 11600 stands at 0.51 which is acting as an immediate resistance level. Equally, important indicator Option Pain is at 11500, indicating expiry at 11600. A shift in option pain will provide further levels.

Based on the Option chain data, Resistance levels are 11600 & 11700 and Support levels are 11400 & 11300. So the expected range based on current data should be 11600 – 11400. There is huge open interest buildup around 11600 CE & 11700 CE. 11400 PE also holding good open interest. Excepting to remain in a range in the coming week as per current data.

Nifty Weekly Options Strategy: 

Nifty Option Strategy

This is my advance strategy, the loss-making zone is 11350-11250, Loss will be 3800₹ only if Nifty expires between this level. On the upper side, a loss will start above 11500. Max loss will be around 4000₹ and profit is unlimited. Adjustments required only above 11500. Don’t worry I will post in comments if adjustments required.

Bank Nifty Weekly Analysis and Option Strategy:

Bank Nifty Chart Today:

Bank Nifty Chart today

As we were expecting from last few weeks that Bank Nifty has to give a breakdown to fill the gap open between 30150 – 29550. On Friday Bank Nifty gave a very good breakdown from 30150 and we saw a sharp decline towards lower levels. Huge selling in PSU Bank is the only reason. Now, 29550-29500 will act as a support zone for Bank Nifty, If manage to sustain then only we can see some recovery from here. Short term trend looking completely bearish. after a breakdown from 29500 bank nifty may test 28500 too.

BankNifty Open Interest Analysis:

Based on option chain data, the highest open interest stands at 30500 CE & 29500 PE followed by 31000 CE & 30000 PE. PCR of all strikes stands at 055 which is a neutral zone. PCR at 29800 stands at 4.90, which is acting an immediate support zone. PCR at 30100 stands at 0.36 which is acting as an immediate resistance zone. Option pain stands at 30000, giving us expiry level. Keep tracking this option pain levels. A shift in option pain will give us a new level for expiry.

Bank Nifty Option strategy: Long Butterfly

Bank Nifty Option Strategy

In this strategy risk is unlimited but only above 30122, So you can use 30122 as a stop loss.

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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.

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Sachin Sival is the founder and CEO of Replete Equities, an options trading company that specializes in delta hedging. A self-taught trader, Sachin has a passion for volatility trading and stock trading. Sachin loves to hone his skills by reading up on new strategies and techniques as well as taking part in industry events. In addition to being a successful entrepreneur, Sachin also takes pleasure in photography - as a hobby.

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