Deploy modified Put butterfly strategy in Nifty

Shubham Agarwal

Nifty closes the week, around 17,951, gaining about 0.44 percent. During the week, Nifty gyrated between 18,150 - 17,745. On the OI (open interest) front, marginal long built-up was witnessed in Nifty Jan Futures over the week gone by as there was an increase in OI, with marginal gains in Nifty weekly closing basis.

On the other hand, Bank Nifty Futures lost about 1.06 percent as it closed the week around 41,205. Its future gyrated between 40,950 and 42,036 and ended the week with a loss.

Further diving into Nifty’s upcoming weekly expiry, Nifty immediate resistance stands at 18,000 levels where nearly 117.95 lakh shares are the open interest followed by vital resistance at 18,500 levels where about 92.75 lakh shares are the open interest. On the lower side, the immediate support level is at 17,800 where nearly 55.94 lakh shares are the PE options open interest followed by 17,500 where nearly 64.32 lakh shares are the PE options open interest.

Looking at Bank Nifty’s upcoming weekly expiry data. On the upside, Bank Nifty’s immediate and vital resistance is at 41,500 where nearly 48.97 lakh shares are the CE open interest, whereas, on the lower side immediate and vital support is at 41,000, about 30.17 lakh shares, which is the PE open interest. At 44,000 about 43.39 lakh shares of PE open interest are present.

India VIX, fear gauge, increased to 13.09 over a week-to-week basis from 12.77. It has been around the lows, roughly flat. Further, any uptick in India VIX could start the downward move in Nifty and vice versa.

Looking at the sentimental indicator, Nifty OI PCR for the week has decreased to 0.876 from 1.037. Bank Nifty OIPCR over the week decreased to 0.602 from 0.868 compared to last Friday. Overall data indicates PE writers are less aggressive than CE writers in Nifty.

Moving further to the weekly contribution of sectors to Nifty. Oil and gas contributed 65.68 points on the positive end to Nifty. NBFC contributed -7.17 points negatively to Nifty, while Information Technology and Private Bank added -30.52 and -24.32 points, respectively. PSU Bank and Metal contributed -18.01 and -3.79 points negatively to the index.

Power contributed 3.61 points to Nifty on the positive end, telecom by 4.43 points, FMCG by 11.18 points, while Auto as a sector contributed negatively by -2.84 points.

Looking towards the top gainer & loser stocks of the week in the F&O segment. Torrent Power topped by gaining over 12.1 percent, followed by Tech Mahindra at 10.5 percent, and Hindustan Aeronautics at 9.8 percent. Whereas City Union Bank lost -13.3 percent, Balkrishna Industries has lost over -11.6 percent and Lupin lost -9.2 percent over the week.

The upcoming week can be approached with a low-risk strategy like modified Put Butterfly in Nifty.