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Deploy modified call butterfly spread strategy in Nifty: Shubham Agarwal

Considering the positive momentum along with the decline in India VIX, a low-risk strategy like Modified Call Butterfly will be prudent.

SHUBHAM AGARWAL | 14-Jun-21
Reading Time: 3 minutes

After some midweek jitters, the bulls continued their charge, with the Nifty again soaring to a new high of 15,855.80 and closing at around 15,821 in the previous week. The Nifty ranged between 15,600 and 15,850 during the week, gaining around 0.77 percent.

The Bank Nifty continued to underperform during the week and closed at 35,164. The banking index gyrated between 35,750 and 35050 during the week. On the OI front, long build-up and long unwinding was seen in the Nifty and the Bank Nifty, respectively.

Further diving into the Nifty upcoming weekly expiry, call writers are showing aggressions by building more position compared to put writers. Immediate and vital resistance stands at 15,800 where nearly 27.6 lakh shares have been followed by 16,000 CE added highest among all.

On the lower side, 15,700 is immediate support followed by 15,600, while the highest OI is at 15,000 PE ie, approximately 39 lakh shares have been added.

Looking at the Bank Nifty’s upcoming weekly expiry data, 35,000 strike shows highest OI of Call and Put both. On the upper side, immediate resistance stands at 35,500 (12.6 lakh shares) followed by 36,000 (11 lakh shares). On the other hand, 35,000 put shows the highest aggression from put writers followed by 34,500.

Fear gauge India VIX eased nearly 9 percent from 15.94 to 14.478 over the week. India VIX is trading at the lowest point since February 2020. Any downtick in India VIX can push the Nifty upwards.

Looking at the sentiment indicator, Nifty OI PCR for the week increased from 1.303 to 1.351. The Bank Nifty OIPCR over the week decreased from 0.689 to 0.739 compared to the last Friday. Overall data indicates more of Put writers over call writers in the Nifty and the Bank Nifty.

Most sectoral indices contributed positively except PVTB, NBFC, and capital goods. IT and oil contributed nearly 145 and 43 points, respectively to the Nifty’s 117.23 points gains. Followed by power and pharma, both adding approximately 29.50 and 19, respectively. PVTB contributed nearly 58 points negatively.

Looking at the top gainer and loser in the F&O segment for the week, Indiabulls Housing Finance topped by gaining over 25 percent, followed by PEL 22.40 percent and Tata Power 16 percent. Petronet LNG lost over 6.1 percent, Voltas 5.3 percent, and Canara Bank 5.2 percent.

Stocks like Indiabulls Housing Finance, BHEL, Canara Bank, SUN TV, and NALCO were in the ban period during the week.

Conclusion

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

Learn and read more about nifty oi chart from Quantsapp classroom which has been curated for understanding of $bias 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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