Weekly Analysis with Option strategy for 28th June – 4th July 2019

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Hello friend, I hope trading is going good. What you think, My Weekly Analysis with Option strategy is working for you? Am I  providing some valuable information in this weekly analysis with Option strategy? Just share your feedback and your suggestions if you have any in the comment box.

This week was very tough for those option writers who just started their journey and trading with short straddle or strangles. One thing I want to share with your friend, Option writing is not for novice traders, It’s an advanced level in your Option Trading. And Risk Management is the only key to success here. If you don’t have much experience, Knowledge, or any Risk Management skills, Better take a risk in Option buying. At least you have limited Risk there. In option writing, Only one bad trade will wipe out all your capital and kick you out from this Market.

As I always say, Trading is business and do it as a business, where you have made all the plans before the start of that business. Same as in trading, If you don’t have any trading plan or any Road map to follow, it’s very difficult to make money here. The market is smarter than you and me. We can’t beat it, nor we can predict it, we can only learn how can we protect our capital in any market movement. If we can manage to protect our capital, Profit will come automatically. So just focus on Capital protection, Rest market will do itself for you.

Weekly Analysis:

  • SEBI lays some strict rules for Debt fund to make it safer for investors. The Mutual Fund Industry is reeling under pressure due to delay in interest, principal repayments & worse defaults by companies that schemes had lent to.
  • L&T has acquired over 60% holding in Mindtree after its open offer to buy 31% of shares got over-subscribed. According to data provided by Stock exchanges, L&T  had bought 20.32% shared in Mindtree from V G Siddhartha & his coffee Enterprises for over 3000Cr in March and subsequently made an offer to buy an additional 31% stake.
  • Nifty ended June expiry at 11841 with 80% rollover compares to 71% in June expiry. Next big event will Budget 2019 which is scheduled to be released on Friday, July 5. Options data suggests a range of 11500-12000 for this July expiry.
  • We saw the market was traded in a range this entire week but movement in the last few hours was very high. In this type of market, if you are sitting with limited risk strategies, you can easily make money without any trap of fear & greed.
  • Short covering in the market is taking indexes to higher levels. Mid-caps & small caps are top contributes. We saw some good buying in PSU Banks, Which are helping to this Upside rally in Bank Nifty.

Nifty chart this week:

Nifty Chart

  • We saw some good upside movement on Tuesday & Wednesday because of short covering. If we look at Fibonacci extension levels, 11760 – 11910 is the reversal zone. A close above 11910 will only lead to further higher levels.
  • Look at the Nifty Chart a candle formed on 20th June. Most of the time Nifty is trading inside that candle. On 26th it tried to give a breakout but couldn’t sustain on 27th June and closed near to 11843.50 which was the high of that candle.
  • So now you can say 11910-11840 is a small resistance level which needs to be a break for more upside movement. Although this level is not that strong it is an important level need to be tracked. A breakdown from this level will lead to 11650.
  • 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 perspective, and We can expect high volatility in coming sessions. As the market will focus on the Budget session now. If Budget session fails to cheers market then we can expect some lower levels on Nifty Chart from here. It can test 11400 or even 11000 too.
  • As I shared in last week post, focus on fundamentally strong scripts now.

Open Interest Analysis:

  • Based on option chain data, the highest open interest stands at 12000 CE & 11800 PE followed by 11900 CE & 11700 PE. PCR of all strikes is 0.95 which is a neutral zone. PCR at 11800 stands at 2.08 which is acting as an immediate support level, PCR at 12000 stands at 0.11 which is acting as an immediate resistance level. Equally, important indicator Option Pain is at 11850, indicating expiry at 11850. A shift in option pain will provide further levels.
  • As per the Option chain data, Resistance levels are 12000 & 11900 and Support levels are 11800 & 11700. So the expected range based on current data should be 11700 – 12000. As you know we can get highly volatile sessions due to Budget event, I suggest keep your positions with proper hedge and avoid short straddle/Strangles the week & keep limited risk strategies.

Nifty option strategy: Iron Condor

Nifty option strategy


Possible adjustments: breakout from 11979 shift Put Spread to 100 points up. A breakdown from 11721, shift call spread to 100 points lower levels.

Bank Nifty Chart this week:

Bank nifty chart

  • Banknifty gave a good breakout, and we saw a decent rally this week. Based on the Bank nifty chart, 31000 & 30500 are the very good support levels and I’m expecting Bank nifty should hold this.
  • We saw some good Buying in PSU Banks, we can see some more upside movement on Bank Nifty chart.
  • Now, 31000-30500 is the level which we need to keep on the radar. If bank nifty manage to hold this zone, we can initiate a long position with a stop loss below 30500.
  • There is a Gap between 30125-29600, which is still open, need to keep on the radar. So in short “I’m bullish if bank nifty manage to hold 31000-30500 zone on Bank Nifty chart.”
  • On upper side, 31700 will act as a strong resistance level. A breakout will lead to good upside movement in Bank Nifty.
  • As we are heading towards budget sessions, and there is lots of uncertainty on the global front we can expect a highly volatile session. And when volatility is high, all the data or levels will not give any clear picture. So better keep your positions with a proper hedge.

BankNifty Open Interest Analysis:

  • Based on option chain data, the highest open interest stands at 31500 CE & 31000 PE followed by 32000 CE & 30500 PE. PCR of all strikes stands at 0.99 which is a neutral zone. PCR at 31000 stands at 3.79, which is acting an immediate support zone. PCR at 31500 stands at 0.20 which is acting as an immediate resistance zone. Option pain stands at 31200, 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: Iron Butterfly

bank nifty option strategyAdjustments 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 30900. Keep put spread as it is. Same thing you can do with put spread after a successful breakout from 31500.

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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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