we have a lot of optimism already built into the F&O data, on the other we cannot overlook the placement of index close to recent high
The upward momentum continued for Nifty as the index closed the last week with gains of over a percent and a half. The truncated week saw larger participation coming from the banking names as the Bank Nifty rose 2.5 percent compared to Nifty50.
Among index futures, Nifty added over 4 percent longs in open interest (OI). Bank Nifty, on the other hand, had significant long additions in the first two sessions of the week, adding about 46 percent in open interest for the week.
Among stock futures, apart from defensive sectors like pharma, FMCG and IT most of the sectors saw either incremental longs or covering of shorts.
Stocks like BEML and Vodafone Idea saw bargain hunting longs, while RBL Bank added continuing longs. ACC and select metal stocks witnessed short covering, while Apollo Tyre and Oil India Ltd added notable shorts.
For Nifty options front, there was some encouragement as the upcoming weekly series on Nifty started off with sizable additions in 11,000 Put, which is the infamous known hurdle.
On the upside, the congestion is held at 11,200 and 11,500 in the upcoming weekly and monthly series respectively.
Bank Nifty, on the other hand, after a stupendous run is placed close to consensus hurdle at 28,000 as indicated by heaviness in both immediate monthly and weekly series options.
Sentimentally too, Nifty is not viewed from over exuberance perspective. Aggregate OIPCR, after hitting the high of 1.8, did subside to 1.6 towards the end of the week, keeping further room for optimism.
On the other hand, India VIX kept up with downward trajectory and ended the week at the low point of 2019.
While on one hand, we have a lot of optimism already built into the F&O data, on the other we cannot overlook the placement of index close to recent high.
Hence a moderate stance would be more prudent via Bull Call Spread to trade further upside.
Bull Call Spread is a bullish strategy that expects a positive move in underlying. It is an idle strategy to play for positive bias along with being completely hedged.
Under this strategy, one should buy 1 lot lower strike call and sell 1 lot of highest strike call. Maximum profit is the difference in strikes less net outflow. Lower end loss is restricted to initial outflow.
The author is CEO & Head of Research at Quantsapp Private Limited.Disclaimer: The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.