Trade with Nifty Long Straddle option strategy next week as 17,200 to be crucial

The past week was nothing less than a roller coaster ride. With all the global events and data pouring in, our markets turned extremely volatile. However, the same looks factored in, when the last session of the week cheered up during the opening and gave back hopes to bulls again.

On the weekly expiry, Put writing was seen at 17,000 strike and 16,000 strike, thereby adding more than 60 thousand contracts each, which is the support built up for the Nifty50 index. Maximum fresh Put writing was also seen at 17,200 strike, which should act as an immediate support as well.

Call writers exposure lies at 17,500 and 18,000 strikes, with over a lakh contracts each, which will be the key resistance zones going ahead. Individual strike PCR_OI (Put Call ratio, open interest) of 17,200 is just below 1, which is to be monitored closely to see if there is a sustenance or a fall now to decide on the movement for the index going ahead.

Nifty if sustains 17,200 levels, will again see a rally till 17,369-17,500 levels, whereas a breach below 17,150 will slide towards 16,900 levels swiftly.

Bank Nifty on weekly expiry saw the data being scattered all over. Put writing was seen at 37,000, with overall 60 thousand contracts - which is the ultimate support zones for the banking index. Aggressive Call writing was seen at 42,000 strike, with overall more than a lakh contracts, that hints on the upside range opening up for the index now.

FIIs have been reflecting on a mixed sentiment- courtesy the eventful week, which is now expected to turn positive and can help the markets now to witness some new rounds of upside momentum to resume.

India VIX has been the spoiler for the bulls all throughout the week, with the spikes seen. The uncertainty anticipation was also at its peak, which led to the super volatility.

Sector updates

On weekly basis, most sectors saw whipsaw movement leading to end almost in the negatives, except for banking, followed by technology, chemicals and oil&gas. So, the focus going ahead should be primarily with the above mentioned sectors for a strong upside.

Stocks updates

Long built up was seen in IDFC, Federal Bank, Axis Bank, HCL Technologies, Aarti Industries, and Chambal Fertilizers.

Short built up was seen in India Cements, Indian Hotels, Motherson Sumi Systems, Indiabulls Housing Finance.

Option Strategy

An option strategy well customised for the coming week now would be a play upon Nifty Long Straddle. A long straddle involves buying of same strike and expiry Call and Put both. It is practiced when either one side sharp movement is expected, so that the move reaps high gains on one side premium.

In weekly expiry long straddle, buy Nifty 17200CE at Rs 142 and 17200PE at 138. Net outflow is Rs 280 and maximum loss will be incurred if expiry happens in between 17,000-17,400 levels. Profits will start showing up on either side of the range and increases rapidly as the movement catches pace.

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