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Deploy Nifty Put Butterfly Spread strategy to beat volatility in the market: Shubham Agarwal

Considering the mix of unwinding and short covering, the week went by saw a continuous increase in VIX and intraday swings. It is prudent to approach the market with a low-risk strategy like Modified Put Butterfly.

SHUBHAM AGARWAL | 30-Mar-21
Reading Time: 3 minutes

Over the last week, Nifty was seen trading in the broader range of 650 points, gyrating from 14,900 to 14,250, and ended the March series by losing 1% & OI (Open Interest) shedding was seen over the week.

Bank Nifty was on the same pitch as Nifty, gyrating in a broader range of 2,000 points from 34,400 to 32,400 losing 1.8% & OI shedding was seen over the week.

The immediate hurdle for Nifty stands at 14,700 and vital resistance stands at 15,000, while the immediate support stands at 14,300 and vital support at 14,000.

Bank Nifty's upcoming weekly expiry has a wider range. However, writer congestion can be seen between 33,000 and 34,000. For the weekly expiry, multiple resistance and support can be seen.

Immediate resistance stands at 34,000 followed by 35,000 and vital resistance stands at 37,000. Whereas immediate support stands at 33,000, followed by 32,000 and vital support stands at 30,000.

INDIA VIX, fear gauge, increased to 20.33 in the past week from 19.99 compared to last Friday. Except for the last day of week (March 26), INDIA VIX increased continuously over the days and gave a cause for worry to market participants. Further, any sustained uptick in India VIX level could be detrimental to the uptrend.

Looking at the sentimental indicator, Nifty OIPCR (open interest put call ratio) for the week declined from 1.2 to 1.145. Bank Nifty OIPCR over the week, remained more or less same at 0.856 compared to last Friday. Overall data indicates higher call writers versus put writers over the week for the Nifty & Bank Nifty.

Nifty Rollover stands at 80% as compared to 77% (Feb Expiry). Bank Nifty rollover stands at 84% as compared to 77% (Feb Expiry).

Looking at the sectoral contribution, heavy sectors like Oil (-62 points), auto have contributed negatively, and minor support was seen from IT & NBFC.

The top gainer and loser stocks of the week in the F&O segment - Adani Enterprises gained the most 11.7%, followed by Aarti Industries & Page Industries 6.5% each. Whereas, PVR has lost the most -10.3%, followed by Indus Tower -8.5%, REC LTD -8%.

Conclusion: Considering the mix of unwinding and short covering, the week gone by saw continuous increase in VIX and intraday swings. It is prudent to approach the market with low-risk strategy like Modified Put Butterfly . Learn and read more about option seller from Quantsapp classroom which has been curated for understanding of intrinsic value from scratch, to enable option traders grasp the concepts practically and apply them in a data-driven trading approach.

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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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