I feel that every week I’m posting option strategies on Saturday, and we missed that premium decay on weekend, so from this week, i will share my weekly analysis and option strategy post on Thursday after weekly expiry so that we can initiate our strategies on Friday and can get the benefit of theta decay on weekend.
Weekly Analysis :
- After election result week, we observed that market is trading in a range only. On Monday Nifty made a new all time high, and we saw most of the sectors were contributing. FIIs was the net buyer on Monday bought 3068.88 Cr in cash, where DIIs sold -462.69. Later on Tuesday & Wednesday FIIs sold around 1450cr in Cash. On Thursday we saw a sharp decline after RBI cut repo rate by 0.25 bps in RBI Monetary policy meet.
- Major event was DHFL delayed interest rate payments, which has hit the NAV of several debt funds by 6-53% as they lent to DHFL in form of debt securities. On June 5th, Several rating agencies have downgraded credit rating on commercial papers to “D” because of liquidity concern.
Nifty trend based on Technical Analysis:
- As I was shared in my previous weekly analysis and option strategy report that Nifty is holding it’s all time high made on election result day and breakout is required for more upside levels. On Monday We got that breakout but On Tuesday Nifty reject that breakout and closed below that 12041 level after made a new all time high of 12103.05 on Monday. On Thursday after RBI policy meet we saw a sharp decline and nifty lost most of it’s Monday gain and closed negative by 1.48%. Even 25 bps rate cut failed to cheer market due to liquidity crises by debt market.
- Now 11745 is a very important level which must be hold for a recovery in market. One more thing we need to observe that the big candle nifty made on election result day, is acting a range for Nifty.
- RSI & MACD both are pointing downward with negative divergence, indicating weakness in strength and momentum.
- Nifty still holding a GAP between 11416 – 11605, which need to be filled before a strong upside journey. So here important levels are 11745, 11605 & 11415. Keep tracking these levels.
Open Interest Analysis :
- Based on option chain data, the highest open interest stands at 12000 CE & 11900 PE followed by 12100 CE & 11800 PE. PCR of all strikes is 0.55 which is an oversold zone. PCR at 11800 stands at 2.42 which is acting as an immediate support level, PCR at 12000 stands at 0.3 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.
Weekly Option Strategy: Iron Condor
- Breakout from 12023, shift Put Spread to sell 11950 PE & 11800 PE buy. Same as shift call spread to Lower levels after a breakdown, New position will be : Short 11850 CE & BUY 12000 CE.
BankNifty trend based on Technical Analysis:
- As I have shared on my previous weekly analysis and option strategy post, BankNifty is still holding that range made on Election Result day. This week too Banknifty traded is trading in that range only. On Thursday we saw a sharp decline because of Liquidity issue in Debt Market. The NBFCs which are the leaders in previous rally are also facing some pressure.
- We saw a sharp sell off in major banking shares on Thursday. INDUSIND BANK, IDFCBANK & BANKBARODA are the top looses on Thursday, lost more than 6% in a single day.
- (Experts) says that RBI’s decision to cut rate is a good step which could help stimulate consumer demand, which is the major factor market is looking nowadays.
- Levels which we need to keep on radar are 30650-30550, This the immediate support range which need to hold for a recovery in BankNifty,
- We should not forget about the GAP at 30072-29480, BankNifty would try to fill this GAP before starting a new Upside rally.
- Overall trend is still UP until BankNifty is holding, 28740-28240. We can say a trend reversal only below these levels.
- RSI & MACD are pointing downward with negative divergence, Indication a weakness in Strength and Momentum.
BankNifty Open Interest Analysis:
- Based on option chain data, the highest open interest stands at 32000 CE & 30500 PE followed by 31500 CE & 31000 PE. PCR of all strikes stands at 0.48 which is a oversold zone. PCR at 30800 stands at 1.92, which is acting an immediate support zone. PCR at 31100 stands at 0.29 which is acting as a immediate resistance zone. Option pain stands at 31000, giving us expiry level. Keep tracking this option pain levels. Shift in option pain will give us new level for expiry.
Weekly Option Strategy : Iron Butterfly
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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.