F&O Manual: Initiate a short straddle at the 18,250 level to play weekly expiry

It was a volatile day and the benchmark indices closed with cuts on May 17, following on to the losses a day prior. After the flat start, the Nifty gradually drifted lower. However, a rebound in the last hour of trading helped the index recoup some losses. The Nifty 50 eventually settled at 18,181.75 levels; down by 0.57 percent or 104.75. The market has closed at a support, analysts said. (Blue bars show volume and golden bars open interest (OI).)

The Nifty Index saw a huge rise of call writers for May 17 expiry right from the 18400 call, all the way to the 18200 call level. “Specific to tomorrow's expiry traders, traders can initiate a short straddle at the 18,250 level with an offset put option of 18,150 assuming the market opens between the 18200 and 18240 level. If the market moves beyond the 18300 level, a call side offset can also be taken,” said Rahul Ghose, Founder & CEO – Hedged. (Bars reflect change in OI during the day. Red bars show call option OI and green bars show put option OI.)

The last-hour recovery in Bank Nifty came from a demand zone of 43,500 to 42,800. Until the 42,800 level is taken out, the chance of an all-time high is still imminent in this Index. “The highest open interest on the call side is built up at 44,000 call strike and a break above this will resume the up move. The downside support stands at 43,500 and a break below this will accelerate the down move,” said Kunal Shah, Senior Technical & Derivatives Analyst at LKP Securities. (Bars reflect change in OI during the day. Red bars show call option OI and green bars show put option OI.)

Exide Industries saw a long buildup with open interest rising 31 percent. A long build-up is a bullish sign that happens when open interest and volume increase with the rise in share price. Jubilant Food Works, Ramco Cement and Chambal Fertilisers were others that saw heavy long buildup. (Bars reflect change in OI during the day. Red bars show call option OI and green put option OI.)

PVR Inox was among those that saw a short buildup with open interest jumping 32 percent. The short buildup is a bearish sign that takes place when the price of a stock falls, along with high open interest and volume. (Bars reflect change in OI during the day. Red bars show call option OI and green put option OI.)