Nifty support at 16600, use call ladder for 6 Oct F&O expiry; Bank Nifty may trade flat-to-cautious today

Nifty support at 16600, use call ladder for 6 Oct F&O expiry; Bank Nifty may trade flat-to-cautious today

By Rajesh Palviya

In Nifty current series there has been a Long Unwinding witnessed with decrease in price of 4.51% and decrease in OI by 52% as of Wednesday wherein there was unwinding of 55.38 lakh shares in OI, decreasing from 106.13 lakh to 50.75 lakh shares ahead of monthly expiry scheduled tomorrow. Nifty current month rollover stands at 64% as on today, while Nifty Put Call Ratio a sentiment indicator used by traders to gauge the market sentiment and mood is currently at 0.73 compared to 0.95 of last week, indicating a flat-to-cautious movement for expiry. India Vix, a market volatility indicator often called the fear gauge, is currently trading 22.09% compared to 18.82% of last week.

Implied Volatility of Nifty ATM options for the current series is at 21.73% in contrast to 20.74% of last week, indicating high movement on either side in expiry session compared to last week. Nifty Put options OI distribution shows that 16,800 has highest OI concentration followed by 16,700 & 16,500 which may act as support for current expiry and on the Call front 17,100 followed by 16,900 & 17,200 witnessed significant OI concentration and may act as resistance for current expiry. Options data suggest an immediate trading range between 17,100 and 16,700 levels & 17,000 acting as pivotal levels. In Nifty Call writing was witnessed at 17,000, 17,100 & 17,200; while on Put side it was seen at 16,800,16,700 &16,600.

Bank Nifty Outlook

In current series there has been a Long Unwinding witnessed in Bank Nifty Fut with an decrease in price of 3.30% and decrease in OI by 48% as of Wednesday, wherein there was shedding of 9.72 lakh shares in OI, decreasing from 20.23 lakh to 10.52 lakh shares ahead of monthly expiry scheduled tomorrow. Bank Nifty Current series rollover stood at 62% as of Wednesday, while Bank Nifty Put Call Ratio is currently at 0.54 compared to 0.89 of last week indicating flat-to-cautious movement for expiry.

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Bank Nifty Put options OI distribution shows that 37,000 has highest OI concentration followed by 36,500 & 37,500 which may act as support for current expiry and on the Call front 39,000 followed by 38,500 & 38,800 witnessed significant OI concentration and may act as resistance. Options data indicated an immediate trading range between 38,500 and 37,000 levels. On a weekly basis significant call writing in Bank Nifty was seen at 39,000, 38,800 & 38,500 strike while on put side it was seen at  37,000, 37,500 & 37,200.

Nifty Open Interest Concentration

Nifty Option OI Change

Bank Nifty Open Interest Concentration

Bank Nifty OI Change

NSE Nifty 50 trading strategy for 6 October F&O expiry

The strategy which we are suggesting for this weekly expiry dated 6th October is a Moderately Bullish strategy called as CALL LADDER, which involves buying of one lot of Nifty 16,950 Call @ 170 & selling of one lot of 17,200 Call @ 81 & one lot of 17,450 Call @ 32. The cost of the strategy involves outflow of Rs 2,850 which is the maximum loss if Nifty trades, and remains below 17,000 levels on expiry. On the expiry day, the maximum profit of Rs 9,650 will be attained above 17,200 levels, while strategy will start making loss if Nifty crosses 17,600, hence it’s advisable to exit the strategy in total to avoid unlimited losses above 17,600. Break Even points of the strategy are 17,007 on downside & 17,643 on the upside.

(Rajesh Palviya, VP – Technical and Derivative Research, Axis Securities. Views expressed are the author’s own.)