Deploy Modified Put Butterfly strategy in Nifty
Considering the bearish mood in the market, the upcoming week can be approached with a low-risk strategy like Modified Put Butterfly strategy in Nifty.
Research by Quantsapp Advisory, SEBI-registered research analyst (Reg. No. INH000006332)
Nifty meandered around the psychological level - 16,000 - and closed the past week in the red. During the week, Nifty gyrated between 16,253 and 15,860. On the Open Interest (OI) front, short built up was witnessed in Nifty over the week gone by as there was an increase in OI.
On the other hand, Bank Nifty lost about 1.04% and closed the week around 34,809. Bank Nifty futures gyrated between 35,599 and 34,541. Overall, it ended the week with a loss of about 364 points and witnessed long unwinding built up on OI front.
Further diving into the Nifty’s upcoming weekly expiry, CE option writers showed aggression in the past week. Nifty’s immediate resistance stands at 16,200 where nearly 34.5 lakh shares is the open interest followed by vital resistance at 16,600 where 47.88 lakh shares were added.
On the lower side, immediate support level is at 16,000 where nearly 37 lakh shares is the PE options open interest followed by 15,900 where nearly 43.2 lakh shares were added.
Let’s look at the Bank Nifty’s upcoming weekly expiry data. On the upside, Bank Nifty’s immediate and vital resistance point is at 35,000, where nearly 19 lakh shares is the CE open interest. On the lower side, immediate and vital support is at 34,500, where 14.6 lakh shares were added.
The fear gauge, India VIX decreased by 4% to 17.64 from 18.40 over the week. Decrease in the IV allayed fear in the market. Further, any downtick in India VIX can push the upward move in Nifty further.
Looking at the sentimental indicator, Nifty OI PCR for the week has increased to 1.208 from 1.195. Bank Nifty OIPCR over the week decreased to 0.86 from 1.07 compared to last Friday. Overall, data indicates PE writers are more aggressive than CE writers in Nifty.
Moving further to the weekly contribution of sectors to Nifty. IT, PVTB, NBFC, Telecom and PSUB have contributed on the negative side in the Nifty by 176.26, 26.19, 8.85, 24.22 and 9.35 points respectively. Also, OIL and Pharma contributed 12.68 and 14.94 points respectively on positive end. FMCG contributed about 39.79 points on the positive end.
Looking towards the top gainer & loser stocks of the week in the F&O segment. Granules topped by gaining over 8.8%, followed by Indus Tower 8.8%, Syngene 7.6%, whereas HCL Tech has lost over -10.3%, NMDC -8.5%, TCS -7.9% over the week.
Considering the bearish mood in the market, the upcoming week can be approached with a low-risk strategy like Modified Put Butterfly in Nifty.
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This trade idea was published on 18 Jul 2022 by Shubham Agarwal for Quantsapp Advisory, a SEBI-registered research analyst (Reg. No. INH000006332) and an independent proprietorship, not Quantsapp Private Limited. It reflects the market on that date and is not a current recommendation.
First published on 18 Jul 2022: prices, lot sizes and expiries are those of that time. They are illustrations for education only, not investment advice. Derivatives trading carries risk; read all scheme and risk documents before trading.