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Deploy modified ‘Put Butterfly’ strategy in Bank Nifty: Shubham Agarwal

The upcoming week can be approached with a low-risk strategy like modified Put Butterfly in Bank Nifty.

January 23, 2023 / 11:55 AM IST

Last week, the Nifty gyrated between 18,224 and 17,887. On the OI (Open Interest) front, a marginal long build-up was witnessed in the Nifty January Futures over the week gone by as there was an increase in OI.

On the other hand, the Bank Nifty January Futures gained marginally, about 0.12%, closing the week at around 42,550. The Bank Nifty futures gyrated between 42,805 and 41,972. Overall, the Bank Nifty ended the week with a gain of about 50 points.

Diving into the Nifty upcoming Weekly expiry, the immediate resistance stands at the 18,100 level, where nearly 133.75 lakh shares are open interest followed by a vital resistance at the 18,500 level, where about 97.11 lakh shares are open interest.

On the lower side, the immediate support level is at 18,000, where nearly 66.76 lakh shares are PE option open interest followed by 17,800 where nearly 66 lakh shares are PE option open interest. At the 19,000 level, about 119.22 lakh shares are CE option open interest, which is a substantial OI built-up.

Looking at the Bank Nifty upcoming Weekly expiry data, on the upside, the immediate and vital resistance is at 43,000, where nearly 24 lakh shares are CE open interest, whereas, on the lower side, immediate and vital support is at 42,000, about 23.80 lakh shares, which is the PE open interest. There is a substantial OI at 42,500 CE and PE with 31.50 lakh and 30.24 lakh shares, respectively.

The India VIX fear gauge decreased to 13.77 over a week-to-week basis from 14.46. Further, any uptick in the India VIX could start a downward move in the Nifty and vice versa.

Looking at the sentimental indicator, the Nifty OI PCR for the week decreased to 0.838 from 1.029. The Bank Nifty OIPCR over the week decreased to 0.952 from 1.02 from the previous Friday. Overall data indicates PE writers are less aggressive than CE writers in the Nifty.

Moving further to the weekly contribution of sectors to the Nifty, Information Technology, Private Banks and NBFCs were positive contributors to the Nifty, with 77.78, 61.01 and 24.73 points, respectively. Capital Goods also contributed positively to the Nifty, by 24.17 points. FMCG and Oil & Gas had -33.05 and -24.14 points (negative) to the Nifty. Power contributed 17 points to the Nifty.

Looking at the top gainers and losers for the week in the F&O segment, Persistent topped by gaining over 6.9%, followed by Coforge with 6.1%, and Coal India, with 5.3%. PVR lost -8.6%, ICICI Lombard General Insurance Company lost over -8.5%, and Indus Tower lost -7.7% over the week.

The coming week can be approached with a low-risk strategy, such as a modified Put Butterfly, in the Bank Nifty.

Shubham Agarwal
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: Jan 23, 2023 11:55 am