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Deploy modified call butterfly spread strategy in Nifty, suggests Shubham Agarwal

Considering the ongoing gyration in November series, upcoming monthly expiry could be approach with a low-risk strategy like Modified Call Butterfly in Nifty.

November 22, 2021 / 09:10 AM IST

Shubham Agarwal

The Nifty yet again had a rangebound activity over the last week with 17,700 on the lower end acting as support and 18,200 on the higher end acting as resistance. Frequent bouts of buying and selling kept option traders on toes throughout the week. For the week passed by, the Nifty fell over 2 percent with open interest (OI) up 7 percent.

BankNifty too was trading under pressure with fall of 2 percent. The 38,000 vicinity acted as a vital support, whereby the index saw minor reversal coming, and ended the week at 38,100.

Further diving into the Nifty upcoming weekly expiry, call writers show aggressions by building more position compared to put writers.

The Nifty immediate resistance stands at the 18,000 call levels where nearly 57L OI is outstanding. On the lower side, immediate support level is at 17,500 put where nearly 5.89L OI is outstanding.

Close

Looking at the Bank Nifty upcoming weekly expiry data, 38,000 strike act as a pivot strike level with major Call and Put accumulation. The 38,000 Call holds 15.3L shares while 38,000 Put holds 13L share outstanding. With upcoming weekly coinciding with monthly expiry, breakout either side could pay way for large momentum.

India VIX, fear gauge, continues to slide southwards with closing at 14.86 down by over 2 percent. Negative divergence in VIX w.r.t. downward price indicates traders are still confident of upward momentum.

Looking at the sentimental indicator, Nifty OI PCR is trading at 0.88 near the support zone. PCR is generally a contrarian indicator. Rise in PCR could see support emerging. Overall data indicates more of put writers over put writers in Nifty.

Moving further to the weekly contribution of sectors to Nifty. Most of the sectoral indices have contributed negative such as IT, private banks, oil, NBFC have collectively contributed nearly -293 in the Nifty's 340-point loss.

Looking towards the top gainer and loser stocks for the week in the F&O segment. Apollo Hospitals topped by gaining over 19.8 percent, followed by Escorts 13.7 percent, and large cap stock like Maruti 8.3 percent. Whereas, Manappuram has lost over 16 percent, M&M Financial -11 percent and Coal India -8 percent over the week.

Considering the ongoing gyration in the November series, the upcoming monthly expiry could be an approach with a low-risk strategy like Modified Call Butterfly in Nifty.

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Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions
Shubham Agarwal is a CEO & Head of Research at Quantsapp Pvt. Ltd. He has been into many major kinds of market research and has been a programmer himself in Tens of programming languages. Earlier to the current position, Shubham has served for Motilal Oswal as Head of Quantitative, Technical & Derivatives Research and as a Technical Analyst at JM Financial.
first published: Nov 22, 2021 09:10 am

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