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Deploy Nifty Modified Put Butterfly Spread strategy: Shubham Agarwal

Nifty upcoming weekly Option data reflects broad range of Call addition 14,700-15,500 strike in which immediate resistance stands at 14,800 level and vital resistance stands at 15,000 strike.

March 01, 2021 / 07:46 AM IST

Shubham Agarwal

Indian equity market saw pull back in the last week of the February series. Uncertainty in the global market had a huge impact on Indian market as well. Nifty in the past week saw huge movement in the range of 1,000 points from 14,550 to all-time high of 15,550 and finally ended up with a loss of nearly 2.8% for the week. Meanwhile, Open Interest (OI) Built up was over 11% attribute to Short.

Bank Nifty on the other hand, too had broader range of almost 2,600 points, ranged from the level of 35,660 to 27,240, pressure in the Bank Nifty came from the Private sector banks. Overall, Bank Nifty ended the week with the loss of nearly 2.8% along with OI of 22% attributed to shorts.

Nifty upcoming weekly Option data reflects broad range of Call addition 14,700-15,500 strike in which immediate resistance stands at 14,800 level and vital resistance stands at 15,000 strike.

Put has remained on lighter side in term of addition as compared to calls. Highest Put stands at 14,800 and at this level addition has been seen. Level of 14,800 could be the crucial level for Nifty to have the further direction.

Bank Nifty upcoming weekly Option data reflects wide range of addition in Open Interest for the Calls & Puts. However, call writers aggression can also be seen in Bank Nifty as well. Multiple resistance stands on the upper level, diving into data indicates the immediate resistance at the level of 35,500 and vital resistance stands at 36,000. From the downside, vital support stands at 34,000.

INDIA VIX, barometer of riskiness, has increased from 25.47 to 28. VIX tried to break the crucial level of 25.5 twice over the week but remained below it, till last day when sudden sell-off in market led the INDIA VIX to top the last 8 months high of 29.5, VIX ended at 28 for the week. Sustained uptick in India VIX level could be detriment for the up trend. Key level of 30 needs to watch out further.

Moving further to rollover for the Feb expiry, Nifty had average rollover of 77% versus 76% compared to Jan expiry. Whereas Bank Nifty rollover stands at 77% compared to 74% (Jan expiry). Grasim topped the stock wise rollover with 94%, followed by Bandhan Bank 92.7%, Hero MotoCorp 92.2%. FINNIFTY had the lowest rollover of 31.7%, SRF & TECH (60% both).

Looking at the sentimental indicator, Nifty OIPCR for the week closed at 1.051 from the high of 1.362. Bank Nifty OIPCR closed at 0.643, remained more or less same over the week.

Overall data indicates higher Call writers versus Put writing over the week.

Moving further to the weekly contribution of sectors in Nifty. Financial & IT sector has dragged the Nifty, PVTB has contributed negative 105 points, followed by PVTB & IT (-100 points both).

Over the week Metal & OIL had marginal gain overall. Looking towards the top gainer & loser stocks of the week in the FnO segment, Tata Chemicals topped by gaining more than 10%, followed by the BHEL (18%) & SAIL (17%). Whereas IGL has the most bleed, lost around (-9.5%), followed by the Power Grid (-9%) & PVR (-8.5%).

Considering cautiousness among the traders led by downward shift in range, rising INDIAVIX level and mix of Short and long unwinding in Indices, it is prudent to approach the market with low-risk strategy like Modified Put Butterfly to participate in downward move, however protecting on upside in case of any reversal.




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Shubham Agarwal
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.
first published: Mar 1, 2021 07:46 am