F&O Manual: Market remains flat; collar strategy in Bank Nifty can work, say analysts

The Nifty traded in a narrow range on February 9 making it difficult for traders to make money. The index eventually closed 0.12 percent or 22 points higher at 17,893.45. A small positive candle was formed on the daily chart with a long lower shadow. Technically, this pattern indicates a breather movement in the market post sharp upside bounce of previous session, analysts pointed out. (Blue bars show volume and golden bars open interest or OI.)

On the options front, 17,900 can emerge as the new battle zone for next week’s expiry. Call writers were active at 18,000 strikes, which is emerging as major resistance for the index. Some put writers were present at the 17,700 strike as that still remains the biggest support to the index. (Bars reflect the change in OI during the day. Red bars show call option OI and green put option OI.)

The Bank Nifty also remained mostly sideways as the index failed to witness a directional move during the day. During the day, traders kept selling closer strikes of calls and put right from 41,100 & 41,900 followed by 41,200 & 41,800 and lastly the 41,300 and 41,700 strikes. “Investors can look at this with a stop loss of a close below the trendline low candle. Alternatively, one can also look at a collar strategy in this using the March month expiry keeping in mind that the stock might take a little more time to move up,” said Rahul Ghose, Founder & CEO – Hedged, an algorithm-powered advisory platform. (Bars reflect a change in OI during the day. Red bars show call option OI and green put option OI.)

Cummins India saw a massive long buildup as open interest rose 72 percent to the highest in the quarter. A long build-up is a bullish sign that happens when open interest and volume increase with the rise in share price. Trent, Jubilant Foods and Bajaj Finserv were others that saw heavy long buildup. (Bars reflect a change in OI during the day. Red bars show call option OI and green put option OI.)

Tyre maker MRF saw a massive short buildup. The short build-up is a bearish sign that takes place when the price of a stock falls, along with high open interest and volume. (Bars reflect a change in OI during the day. Red bars show call option OI and green put option OI.)

Adani Enterprises, Shree Cement, Adani Ports and ACC were others that saw a short buildup. (Percentage reflects a change in futures price during the day.)
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