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Deploy Nifty modified call butterfly spread strategy: Shubham Agarwal

Considering the index is retracting from its strong support, low-risk modified call butterfly spread is recommended in Nifty.

June 21, 2021 / 07:37 AM IST

After four weeks of continuous positive momentum, broader market experienced high volatile moves over the last week. Nifty touched fresh all time high - 15,909. Unable to sustain at higher levels it took a dip reaching 15,400 levels.

Surprisingly, Nifty took support at 15,400 and bounced back sharply. The week ended by losing around 0.76% closing at the level of 15,696.70.

Bank Nifty, on the other hand, lost more than 1 percent as last week and closed at 34,718. Bank Nifty, over the past week, gyrated between 35,500 and 33,900. On the OI (Open Interest) front, Long Unwinding and Short built-up was witnessed in Nifty and Bank Nifty, respectively, over the week gone by.

Further diving into the Nifty upcoming Weekly expiry Call writers is showing aggressions by building more position. Immediate and vital resistance stands at the 15,800 levels with addition of nearly 39 lakh shares followed by 16,000 CE added highest among all.

On the lower side, 15,500 is immediate support with nearly 38 lakh shares been added followed by 15,000 while highest OI is at 15,000 PE i.e., approx. 52 lakh shares have been added.

Looking at the Bank Nifty's upcoming weekly expiry data. Immediate resistance stands at 35,000 (12L share) followed by 36,000 (12L shares). On the lower side, 34,500 is immediate support nearly adding 7.6 lakh shares followed by 34,000 with highest OI where approx 9 lakh shares have been added.

India VIX, fear gauge, rebounded nearly 3.5% from 14.1 to 14.6 over the week. India VIX is still trading around lowest point since Feb 2020. Cool-off in the IV has given relaxation to the market. Further, any downticks in India VIX can push the upward momentum in Nifty.

Looking at the sentimental indicator, Nifty OI PCR for the week has decreased from 1.351 to 1.172. Bank Nifty OIPCR over the week has increased from 0.739 to 0.795 compared to last Friday. Overall, data indicates more of call writers over put writers in Nifty.

Moving further to the weekly contribution of sectors to Nifty. Most of the sectoral indices have contributed negatively except IT, FMCG and Oil. Private Bank and NBFC has contributed nearly -43 and -28 points respectively in the Nifty -70.84 points loss. Followed by Infra & PSU Bank both adding approx. -26.50 & -18 respectively. Whereas IT and FMCG contributed nearly 116 and 32 points respectively on the positive side.

Looking towards the top gainer & loser stocks of the week in the F&O segment. Gujarat Gas topped by gaining over 9.1%, followed by Marico 6.1%, Naukri 5.9%. Whereas, Adani Ports has lost over 18.5%, BHEL 15.3%, Ashok Leyland 11.6% over the week.

While Stock like PNB, BHEL, Adani Ports, Canara Bank and Escorts were in Ban Period across the week.

Conclusion: Considering index retracting from its strong support, low-risk modified call butterfly spread is recommended in 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: Jun 21, 2021 07:37 am