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Deploy call butterfly spread strategy in Nifty this week: Shubham Agarwal

Considering the bullish momentum, the upcoming week can be approached with a low-risk strategy like Modified Long Call Butterfly Strategy in Nifty.

SHUBHAM AGARWAL | 04-Oct-21
Reading Time: 3 minutes

Nifty finished the September F&O series with another rally of more than 3 percent. Nifty continued its uptrend and touched another fresh all-time high of 18,088.3 and closed around 17,525.

The Nifty futures during this week ranged from 18,088.30 to 17,433.0, ending the week by losing around 1.84 percent. On the OI open interest front, Long Unwinding was witnessed in Nifty over the week gone.

Nifty saw a lower rollover of 74 percent versus 83 percent in the last expiry, however, OI remained higher at 16.28 million versus 15.54 million. Bank Nifty saw a roll of 83 percent versus 78 percent. Open interest stood at 2.59 million versus 1.92 million in the last expiry.

Bank Nifty, on the other hand, showed volatile moves and ended the week with a loss of approximately 500 points - closing around 37359.90. Bank Nifty over the week traded between 38,395 and 36,950. On the OI front, a short build-up was witnessed in Bank Nifty over the week gone.

Further, diving into the Nifty's upcoming weekly expiry, Call writers showed aggression by building more positions compared to put writers. Nifty vital resistance stands at the 18,500-levels with nearly 46 lakh OI - highest among all followed by immediate resistance at 18,000 levels with 42 lakh share additions. On the lower side, the immediate support level is at 17,400 with nearly 29 lakh shares followed by 17,000 with the addition of 26 lakh shares.

Looking at the Bank Nifty's upcoming weekly expiry data. On the upper side, immediate resistance stands at 38,000 (15L share) followed by 37,500 (10L shares). Whereas, on the downside, 37,000 (11L shares) stand at the immediate support level and are followed by 36,000 (8L shares) as the vital support level.

India VIX , fear gauge, marginally increased around 1.30% from 16.92 to 17.14 over the week post moving higher above 18. Cool off in VIX at Friday end was seen. Further, any downticks in India VIX can push the upwards momentum in Nifty.

Looking at the sentimental indicator, Nifty OI PCR for the week has decreased from 1.267 to 0.994. Bank Nifty OIPCR over the week decreased from 0.891 to 0.769 compared to last Friday. Overall data indicates more call writers overput writers in Nifty.

Moving further to the weekly contribution of sectors to Nifty. Most of the sectors contributed negatively except auto, oil, power, and pharma. PVT Bank and IT collectively contributed around 250 points in Nifty approximately 300 points loss. NBFC and FMCG were the top contributors followed by PVT Bank and IT.

Looking towards the top gainer & loser stocks of the week in the F&O segment. Tata Power topped by gaining over 17.6%, followed by BHEL 17.10%, Coal India 14.20%. Whereas Metropolis has lost over 9.8%, Tech Mahindra 9.30 %, Mphasis -9.20% over the week.

Considering the bullish momentum, the upcoming week can be approached with a low-risk strategy like Modified Call Butterfly in Nifty.

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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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