nifty bank: Nifty and Nifty Bank option trading strategy for November series

The stock market has witnessed some stupendous rally in the past series, making the festives more vibrant for the bulls.

Nifty rollovers seen at 76% this series, in line with the previous month, but below the 3 months average, and as per option chain analysis the monthly expiry PE writers are active at 17000CE – overall 60 thousand contracts, followed by 17500PE – highest fresh additions of 8 thousand contracts seen. CE writers make their way at 18000CE/19000/19500 strikes – overall over 30 thousand contracts each, with max fresh exposure seen at 19500CE as well.

On weekly expiry, PE writers actively added their positions of more than a lakh contracts at 17700PE, with CE writers exposure of again more than a lakh at 17800/18000/18200CE levels. PCR OI at 17700 now being much higher than 1, is a very positive sign for the bulls.

Thus the data hints on the range in between 17600-18300 for the series.

Option strategy for Nifty monthly expiry:

1. Long Straddle at 17800.

Straddle strategy involves buying of CE and PE of the same strike and of the same expiry.

2. Bull Call Spread: Buy 17800CE and sell 18200CE.

Nifty Bank

After attempting a rally towards all-time highs, Nifty Bank still looks to keep up the momentum up and running for the bulls. The rolls are at 77%, which is below the past 3 months average and the monthly expiry option chain reflects on PE writers being active at 40000/41000 strikes – overall 16 thousand and 14 thousand contracts respectively. CE writers added strong exposures at 42000, followed by 43000 strikes. The weekly basis, reflects on PE writers building positions at 41000 strike – overall more than 70 thousand contracts, with CE writers adding exposure at 41500 strike- more than a lakh contracts, followed by 42000/43500 strikes – overall additions of more than 80 thousand contracts each, which reflects on the immediate support at 41000 zones for the Index, with extended targets of 43300.

Thus the data hints on the downside being well capped at 40000 zones and upside targets first placed at 41500 and a sustenance there can lead towards 43000 zones soon.

Option Strategy for Nifty Bank monthly expiry:

1. Short Strangle: Sell 39500PE and Sell 43000CE.

Caution: Selling of options is a very complex and high risk and gain scenario.

Sectors likely to outperform in this series would be banking, financial services, pharma, realty, oil & gas, auto, metals, while weakness looms over technology.

Long picks:

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Short picks:

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(The author is Derivatives Lead Analyst, Prabhudas Lilladher)

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