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Deploy Nifty modified call butterfly spread strategy: Shubham Agarwal

Considering the positive momentum along with a decline in India VIX, the upcoming week can be approached with a low-risk strategy like Modified Call Butterfly in Nifty.

SHUBHAM AGARWAL | 07-Jun-21
Reading Time: 3 minutes

After a strong rally of more than 6 percent in May, the Nifty continued its uptrend to touch an all-time high of 15,756 and ended the previous week at around 15,700.

The Nifty ranged from 15,400 to 15750 during the week to end 1.53 percent higher. The Bank Nifty underperformed the index and closed at 35,508. Over the week, the bank index gyrated between 35,000 and 36,000.

On the open interest (OI) front, long build-up witnessed in both the indices- Nifty Historical Data & BankNifty Historical Data witnessed Long Built Up. Put writers are showing aggressions by building more position compared to call writers. Immediate and vital support stands at 15,500, where nearly 26.5 lakh shares have been added, the highest among all.

On the upper side, 15,700 is immediate resistance followed by 15,700 and 16,000 with the addition of approximately 34 lakh and 30 lakh share, respectively.

Let's look at the Bank Nifty Index Data upcoming weekly expiry. On the upper side, immediate resistance stands at 35,500 (15 lakh share) followed by 36,000 (11 lakh shares). Interestingly the highest OI on the put side is also on 35,500 by adding (11 lakh share) followed by 34,500 with the addition of (8 lakh share).

India VIX, fear gauge, eased nearly 14 percent from 17.40 to 14.95 over the week. It is trading at the lowest point since February 2020. The cooling off has given the market a breather. Any downticks in India VIX can push the Nifty up.

Looking at the sentiment indicator, the Nifty OI PCR for the week has decreased from 1.321 to 1.305. Bank Nifty OIPCR over the week decreased from 0.77 to 0.069 compared to the last Friday. Overall data indicates more of put writers over call writers in the Nifty and the Bank Nifty.

Looking at Index Contribution - Indices Data by different sectors towards NIFTY, Most sectoral indices contributed positively except IT and pharma. Oil and NBFC contributed nearly 181 and 81 points, respectively, in Nifty’s 313-point gains. Capital goods and private banks added around 18 points each, whereas IT contributed nearly 16 points negatively.

Looking towards the top gainer & loser stocks in the F&O segment, Adani Enterprises topped by gaining over 30.6 percent, followed by Muthoot Finance 18.9 percent, Indiabulls Housing Finance 17.80 percent. Aurobindo Pharma lost over 6.1 percent, M&M Financials 5.1 percent, and Sun TV 4.3 percent over the week.

Stocks like PNB, SAIL, Sun TV, and Bank of Baroda were in a ban Period across the week.

Conclusion

Considering the positive momentum along with the decline in India VIX, in the upcoming week, the Nifty can be approached with a low-risk strategy like Modified Call Butterfly . Check Live NSE Indices data @Quantsapp

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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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