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Deploy Modified Call Butterfly strategy on Nifty this week: Shubham Agarwal

Considering the longs Built up in Nifty and decline in India VIX has given a positive outlook, it is prudent to approach market with low-risk strategy like Modified Call Butterfly.

SHUBHAM AGARWAL | 05-Apr-21
Reading Time: 3 minutes

undefinedAfter two consecutive weeks of fall in Nifty, a small amount of positive momentum was seen this week, helping Nifty to close near 15,000 level. After a gap-up opening on March 30 morning, Nifty was trying to maintain the positive momentum throughout the week, and gained nearly 2.7%. Open Interest (OI) built up was nearly 15% over the past week.

Whereas, Bank Nifty was riding the roller coaster ride. It started losing the movement after a gap-up opening in the week, however, boost on the last day helped Bank Nifty to gain nearly 2% over the week. Bank Nifty witnessed Open Interest (OI) shedding by nearly 20% over the week gone by.

Nifty's upcoming weekly expiry data shows the wider range. Both Call & Put writers were seen adding position on the wider side. Immediate hurdle stands at 15,000 and vital resistance stands far at 16,000. Meanwhile, vital support is at 14,700, followed by 14,000.

Moving towards Bank Nifty's upcoming weekly expiry data. Bank Nifty OI is widespread all over from 30,500 to 40,000 level. Call writers are actively adding position till 37,000 and Put writers are actively adding a position to 30,500. Further, the immediate hurdle is at 34,500 and vital resistance is at 35,000. Whereas, highest Put OI stands at 33,500, followed by 33,000.

India VIX, fear gauge, has declined gradually to 19.99 from 20.65 compared to last Friday. The decline in VIX has given some sort of relaxation to market participants. However, at times in past and even two weeks ago, India Vix has surged from 19.99 level to 22.7-23 level, so a watch on Vix level.

Looking at the sentimental indicator, Nifty OIPCR for the week has remained more or less the same at 1.164 from 1.138. Same as Nifty, Bank Nifty OIPCR over the week also remained more or less same at 0.807 compared to last Friday. Overall data for Nifty indicates more Put writers versus Call writers and for Bank Nifty Call writers are more over Put.

Looking at the sectoral contribution, all sectors have contributed positively to Nifty. Private Bank contributed the most (122 points) to Nifty, followed by IT (96 points), Metal (66 points).

Among the top gainer and loser stocks of the week in the F&O segment, Jindal Steel has gained the most by 14.2%, followed by Navin Fluorine & JSW Steel nearly 13.7% each. Whereas, Naukri has lost the most -4.5%, followed by Trent & PEL -1.3% each.

Conclusion: Considering the longs Built up in Nifty and decline in India VIX has given a positive outlook, it is prudent to approach market with low-risk strategy like Modified Call Butterfly .

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SHUBHAM AGARWAL is a CEO & Head of Research at Quantsapp Pvt. Ltd. He has been into many major kinds of market research and has been a programmer himself in Tens of programming languages. Earlier to the current position, Shubham has served for Motilal Oswal as Head of Quantitative, Technical & Derivatives Research and as a Technical Analyst at JM Financial.

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