Weekly Analysis and Option Strategy for 3rd – 7th June 2019

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Weekly Analysis and Option Strategy for 3rd – 7th June 2019

Hello Friend,

I Hope you are doing good in your trading. This was very good week for the option writers like us. Market Trading in a range most of the time and this is what we want. A range-bound market and let the premium erode.

On Monday Nifty Opened at 11855.50, made a low of 11812.40 with a high of 11957.15. Next 3 days Nifty traded in that range only. On Friday it tried to give a breakout but couldn’t sustain, and we saw a sharp decline from higher level, which drag nifty to 11829.45 (almost 200 points down from higher levels). Later we saw some recovery and Nifty Closed at 11922.89 this week. We saw some selling from higher levels in most of the sectors on Friday. Nifty PSU BANK, Nifty Small cap 100 & Nifty Media was the top losers. India Vix Trading near 15-16, Indication a stability in market. But The Movement we got on Friday, In just few minutes 200 points fall, it indicates we need to be little cautious, and we should keep our position with proper hedge.

Nifty 50 : 11922.80

Nifty weekly analysis with Option Strategy

Now look at the Big Candle we got on election result day. Nifty is trading inside this long candle. And we can’t take a proper directional bias until Nifty is trading in this range. Breakout or breakdown will require for further movement. Overall tern is UP. RSI is also pointing upward direction. But Nifty is facing some pressure at higher levels. Still, not ready to break that All time high, which was made on election result day. Overall I’m not expecting much downside in Nifty, but we should keep our stop loss ready in our systems. As Market is supreme and it can give us surprise anytime.


One more thing I observe in my trading career, Market always plays against the noise. When everyone is bullish, Market will go down, when everyone is bearish it will surprise you with its bullish move. Everyone is waiting for the election results and expecting that Market will zoom after results but you can see it is testing our patience. So what I suggest is, always trade with your trading plan, Stop running behind market, Focus on what you are doing? How you are managing your trade? And always keep your back up plan ready.

Open Interest Analysis

Based on option chain data, the highest open interest stands at 12000 CE & 11000 PE followed by 12100 CE & 11800 PE. PCR of all strikes is 0.74 which is a neutral zone. PCR at 11800 stands at 5.12 which is acting as an immediate support level, PCR at 12000 stands at 0.25 which is acting as an immediate resistance level. Equally, important indicator Option Pain is at 11900, indicating expiry at 11900. A shift in option pain will provide further levels.

Option Strategy: IRON Butterfly

Iron Butterfly

Note:This strategy will only work if Nifty is trading between 11800-12000 only.

BankNifty : 31375.40

BankNifty Weekly Analysis with Option Strategy

If, you look at the chart BankNifty also Trading inside that big candle which was formed on election result day. On Friday we saw a sharp downfall of almost 1100 points in BankNifty, which is giving some caution signal. We can see, there is a strong support around 30650, Today also Banknifty reversed from this level. So this would be a major support area for bank nifty Need to sustain Below that level, then only we can expect some more downside levels in Banknifty. Although, We saw some good buying in PSU Banks which is supporting this rally of BankNifty. So 31750-30650 is the range which need to break for further levels. Till then, we should expect some range-bound activity in BankNifty. Overall Trend is still UP, but we can see some -ve divergence on RSI and MACD which is indication some pressure on high levels. So keep your positions with proper stop loss and hedge.

Open Interest Analysis:

Based on option chain data, the highest open interest stands at 3200 CE & 31000 PE followed by 30500 PE & 31500 CE. PCR of all strikes stands at 0.69 which is a neutral zone. PCR at 31200 stands at 2.01, which is acting a immediate support zone. PCR at 31500 stands at 0.4 which is acting as a immediate resistance zone. Option pain stands at 31500, giving us expiry level. Keep tracking this option pain levels. Shift in option pain will give us new level for expiry.

Note: Any of these number are not 100% reliable. You will get just an idea that what is happening in Market. You should look at other parameters too to come up on a conclusive view.

Weekly Option Strategy : Iron Condor

BankNifty weekly analysis and option strategyPossible adjustments: Breakout from 31627, shift Put Spread to sell 31500 PE & 31300 PE buy. Same as shift call spread to Lower levels after a breakdown, New position will be :  Short 31200 CE & BUY 31500 CE.

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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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