Considering secular move in Nifty since the last couple of sessions along with important resistance placed at 11,500, it would be prudent to go with conservative bullish strategy Bull Call Ladder for the next couple of sessions.
July series saw a stellar rally in both Nifty and Bank Nifty. The Nifty index was up by 5.59 percent while the Bank Nifty was up by 4.36 percent on expiry to expiry basis (E-o-E).
Rollover too was on a strong note with a Nifty roll of 72.89 percent compared to 63.6 percent seen in the last expiry while Bank Nifty roll was at 77.49 percent compared to 71.4 percent.
With the uncertainty revolving around the introduction of the first phase of physical settlement, the stock specific movement was under the limelight. Reluctance among participants to carry forward positions in these stocks to the next series was evident as relatively lower open interest (OI) got carried forward.
Series saw Energy Index as best performer with a gain of over 11 percent mainly led by Reliance and ONGC. PSU Bank, Private bank, Nifty IT and Nifty infrastructure were other sectors that saw a significant rally in July series.
Expiry over expiry long built-up was witnessed in Adani Group stocks along with Tata Elxsi and ICICI Bank that saw positive price action along with incremental open interest built-up.
Rollover too was over 85 percent indicating long carried forward to the next series. On the other hand, the short build-up was seen in stocks like Apollo Hospitals, Hero MotoCorp and Kajaria Ceramics in the July series along with good rollover to the next series.
Option data for Nifty saw tremendous breakthrough as Call writers at 11,000 saw a sharp covering that propelled the upward momentum. Put writers have shifted higher to 11,000 strikes.
The August series commence on a positive note. Immediate resistance is placed directly at 11,500 with OI of ~30 lakh shares while 11,000 Put stands at ~40 lakh. The Nifty August PCR OI trades at 1.39 and is inching higher which supports positive momentum.
Volatility Skew (an advance derivative tool that’s plotted by using implied volatilities of OTM Call, OTM Put and an average of Call and Put for ATM options) at beginning of July series did give early signals of trending bullish expiry with a steeper slope.
As we move in August series, slope continues to be steep, keeping the room open for further upside.
Participant data shows Foreign Institutional Investors in buying mode. Their Long/Short ratio in Index future has moved to 1.45 compared to 0.67 last month.
Client on other hand remained balanced with the ratio at 1.14. Proprietary traders are taking contra bet with the long/short ratio at 0.27. In Index Option too FII are steadily increasing their longs via Synthetic futures (Call Long + Put short).
Considering secular move in Nifty since the last couple of sessions along with important resistance placed at 11,500, it would be prudent to go with conservative bullish strategy Bull Call Ladder for the next couple of sessions.
Bull Call Ladder is a moderately Bullish strategy that is executed by buying a Call and selling two higher strike Calls at different strikes. We have selected relatively farther strike to take a cushion for positive price action.
Maximum Profit is made between two strikes sold if the strategy is held till expiry. This is protected option writing strategy that aims to make money from sideways to a bullish market. The strategy has a downward protection that ensures a limited loss in case prices takes a U-turn.
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