Amit Trivedi, co-founder of Investworks.in shares his outlook and strategies on the market, in an interview to CNBC-TV18.
Below is the edited transcript of his interview to CNBC-TV18.
Q: Today looks like it is going to start off on a good note, but would you advise a long position in the market at the start? If yes; where would you place your stop loss?
A: If you look at the market internals, the volatility index (VIX) is still quite high around 29 percent. Whenever there is such kind of expected volatility in the future, markets tend not to go up much from hereon. So, we do not expect markets to go much beyond 5,600-5,650 levels.
For September, everyone is waiting for September 18 (FOMC meet) where you have the quantitative easing (QE) or tapering part of Fed decision coming out. The market should broadly be in a range of around 5,100 on the lower side and 5,650 kind of on the maximum higher side.
Q: What strategy do you have on the Bank Nifty this morning? It seems to open up likely on a positive footing at least before this news came in. How would you approach it?
A: Banks have generally been sold off quite a bit. So, the Bank Nifty is down from around some 13,000 levels around May to around 9,000 levels or slightly lower than that. Bank Nifty volumes have also gone up to around 41 percent. So we think one can do a call ladder strategy in Bank Nifty, which is buy 9,000 calls, sell 9,500 and 10,000 calls.
So your breakeven is any value above 9,120 odd levels. You start making money in the strategy and even if market goes up, mildly, the volatility will come down and as you have sold more options than you have bought; you will net make some profit in this strategy.
Q: You have a strategy on Tata Steel for the day?
A: Yes. Tata Steel has moved to around Rs 290 levels. It can go anywhere, but we think marginally it should stabilise at the current levels or move up quite a bit. One can go and trade a ratio trade in Tata Steel which is buy 340 Calls and sell two quantities of 350 Calls.
So there is a net inflow of around 60-65 paise in the trade. So we make around Rs 650 if Tata steel remains any value less than Rs 360, close to 18 percent from current levels.
Q: What about Tata Motors? It has moved up above its 200 in its day moving average (DMA). You have a strategy there as well?
A: Yes. Europe is stabilising and companies which have a focus there should tend to benefit in the near and the long-term. Tata Motors does have some potential to move up slightly from hereon. So one can go and trade a ladder strategy again on the call side, which is buy 350 calls and sell 360 and 370 calls. So, there is zero rupees invested in this strategy.
And if Tata Motors does go up quite a bit; even 3-4 percent, this spread will open up. So that is a profit that you can make in this strategy.