By Rahul Ghose, Founder & CEO at Hedged
The Nifty Options data currently suggests a bullish range to still continue for the rest of the June series. The 18,800 and 18,700 Put options for both the weekly and monthly expiry are currently being written as we speak.
In fact on Friday, we even saw writing at the 18,900 and 19,000 Put options of June monthly expiry. These are In-the-Money (ITM) options whose writing signifies that traders are very confident of the bullish movement to continue.
Having said that, the reason for mentioning the mildly bullish range is as their strong Call writing currently at the 19,000 level for both the June as well as the July expiry. This means that the index will have trouble closing above the 19,300 mark. The reason 19,300 and not 19,000 is because we need to take into account the premiums of the 19,000 Call. We also expect the ferocity of the rally to reduce as the index crosses the 19,000 level in the July series.
Taking these factors into consideration, we have planned a bullish to sideways strategy for the rest of June series and July series.
Strategy Name : Hedged Crystal Collar
Strikes :
(Long) Nifty July Futures
(Long) Nifty 27th July 18800PE
(Short) Nifty 06th July 19000CE
The strategy can be taken when the Nifty spot is between 18,800 and 18,900, preferably close to 18,800.
Maximum risk in the trade : Rs 6,000 (Risk in the trade is calculated based on modifications given below)
Maximum Profit : Rs 10,000
Beauty of the strategy : The beauty and creativity of this strategy revolves around the fact that this strategy will make you money even if Nifty goes up, stays sideways as well as is very mildly bearish. In all scenarios, we are able to gain some alpha owing to the way we have mixed and matched the options strikes, thanks to our Hedged algorithms.
Possible modifications : In case the Nifty Index stays sideways or goes down, roll the sold calls from the July 6th expiry to the next expiry of July 13th and so on. Rolling should happen as and when the premium of the sold Call dips below the Rs 25 level. In addition, if the Nifty index falls sharply, one can roll down the Calls to the 18,900 level instead of selling the 19,000 Call only. This will help gain some extra premium. In case, we make Rs 5,000-Rs 6,000 in June itself, one can look to exit the trade as the return on capital would be truly handsome.
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