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

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

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

undefinedNifty continued to inch up after a sharp sell-off last Friday and made a fresh all-time high of 16,730. Nifty closed the week ended August 27 around 16,712 with a gain of more than 250+ points. Nifty gyrated in the 16,730-16,340 range and witnessed long build-up on OI (open interest) front in the week gone by.

The Bank Nifty, on the other hand, also gained momentum. Bank Nifty traded in the broader range of 35,900-34,859. Overall, Bank Nifty ended the week with gains of more than 1.87% with a rise of approximately 650+ points last week.

Further diving into the Nifty's upcoming Weekly expiry, Call writers are showing aggression by building more positions compared to put writers. Nifty Vital resistance stands at the 16,700 levels - with nearly 34 lakh shares bet on - highest among all - followed by 17,000 levels. On the lower side, the immediate and vital support level is at 16,600 - with nearly 44 lakh shares - - followed 16500 with the addition of 34 lakh shares.

Looking at the Bank Nifty's upcoming weekly expiry data. On the upper side, immediate resistance stands at 36000 (20 lakh share) followed by 36500 (9 lakh shares). Whereas, on the downside, 35500 (13 lakh shares) stand at the immediate support level and are followed by 35500 (10 lakh shares) as the vital support level.

India VIX, fear gauge, drops marginally around 5.50% from 14.02 to 13.35 over the week. India VIX is trading near the lowest level of a pre-covid crash. Cool off in the IV has given relaxation to the market. 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 increased from 1.214 to 1.401. Bank Nifty OIPCR over the week decreased from 0.689 to 0.971 compared to last Friday. Overall data indicate, more of put writers over call writers in Nifty and Bank Nifty.

Moving further to the weekly contribution of sectors to Nifty, the sectoral contribution was mixed last week. NBFC, FMCG, OIL and Private bank has positively contributed nearly 58.91, 47.27, 44.41, and 43.12 points in the Nifty. While on the other hand Metals, Auto, and Telecom has contributed 37.97, 22.69, and 21.37 negatively in Nifty.

Nifty rollover stands at 83.2% versus 82% (July Expiry Day), Bank Nifty rollover stands at 78.4% versus 81% (July Expiry Day).

Page Industries, Torrent Power are the stocks with the highest rollover of around 99% each followed by Adani Ports witnessed a rollover of 98.6%. SBI Life witnessed the least rollover of 61.3%, followed by Idea 62% & NMDC witnessed a rollover of around 62.9%.

Looking towards the top gainer & loser stocks of the week in the F&O segment. NALCO topped by gaining over 16.30%, followed by Escorts 13.40%, Naukri 9.50%. Whereas, Coromandel has lost over -5.90%, Glenmark -4.70%, Bharti Airtel -4.20% over the week.

Considering the bullish momentum, this 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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