The Nifty is trading in a small range of 5400 - 5600, witnesses the low trading activity in the F&O segment. This is due to no clear conviction to the traders, either from global or local front and huge macro data inflows. If we observe the Nifty future data on daily closing basis, it can easily conclude that the positions are switching very fast from long to short and vice a versa which itself indicates the low volume.
If we see the options data, continues accumulation has been witnessed in 5600 and 5700 strike prices in the calls implies the call writing implies the near term resistance while traders are selling the puts at 5300 and 5400 strike prices indicates short term support to the market. The above data indicates that market may trade in the range of 5300-5700 level for the current month. 5500 Strike price which is known as at the money (ATM) in F&O parlance has the implied volatility (IV's) quoting at 16 to 17 levels; one of the low in the current time. IV can also reflect the demand and supply for the option traders.
Whenever IV's will increase more demand is for buying the options either to hedge the portfolio or to bet on the directional view while low Iv's means more supply i.e. selling the options. Low IVs are indicating the trader's activity towards selling the options as nothing is happening in the future segment. Sectorwise activity is seen in media, automobile, cement and infrastructure stocks on weekly basis.
STRATEGY
We recommend to sell Nifty 2 lots each of July 5500 call & put and simultaneously buy 1 lot each of Nifty 5500 June call and put. The strategy will give you maximum profit of premium received if the Nifty will expiry either at 5300 or 5700. It the expiry will be at 5500 then you are having the small loss. Huge losses can start if Nifty will expiry below 5200 and above 5900 which I suppose to be rare. Still small traders should be cautious in this strategy as selling the option is very risky.
STOCK IDEA
Buy ITC June Future above 193 with the stop loss of 188 and the target of 205.
(The author is Senior Analyst-Institutional Derivatives Sushil Financial Services)
If we see the options data, continues accumulation has been witnessed in 5600 and 5700 strike prices in the calls implies the call writing implies the near term resistance while traders are selling the puts at 5300 and 5400 strike prices indicates short term support to the market. The above data indicates that market may trade in the range of 5300-5700 level for the current month. 5500 Strike price which is known as at the money (ATM) in F&O parlance has the implied volatility (IV's) quoting at 16 to 17 levels; one of the low in the current time. IV can also reflect the demand and supply for the option traders.
Whenever IV's will increase more demand is for buying the options either to hedge the portfolio or to bet on the directional view while low Iv's means more supply i.e. selling the options. Low IVs are indicating the trader's activity towards selling the options as nothing is happening in the future segment. Sectorwise activity is seen in media, automobile, cement and infrastructure stocks on weekly basis.
STRATEGY
We recommend to sell Nifty 2 lots each of July 5500 call & put and simultaneously buy 1 lot each of Nifty 5500 June call and put. The strategy will give you maximum profit of premium received if the Nifty will expiry either at 5300 or 5700. It the expiry will be at 5500 then you are having the small loss. Huge losses can start if Nifty will expiry below 5200 and above 5900 which I suppose to be rare. Still small traders should be cautious in this strategy as selling the option is very risky.
STOCK IDEA
Buy ITC June Future above 193 with the stop loss of 188 and the target of 205.
(The author is Senior Analyst-Institutional Derivatives Sushil Financial Services)
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