In my eight years of my trading career, I haven’t seen such type of volatility in the market. But do this volatility matters if you are keeping your risk on the limited side? In my Nifty and Bank nifty weekly analysis post, I’m sharing my analysis for Nifty and Bank Nifty along with one Weekly option limited risk strategy for the coming week.
As I said, I haven’t seen such type of volatility in the market but I’m not scared of this volatility because I have my solution to keep my risk on the limited side. Do you want to know my solution? Read this post till the end to find the solution.
We both know, Market is full of uncertainties. We don’t need a big news even a small news can put a big impact and trend can change anytime.
Every data we are following is telling what had happened in previous trading sessions, but what will happen in coming sessions? no-one knows. If someone is claiming that he/she knows, either he/she is telling a lie or don’t have that experience in this market.
…Because only the market knows what will happen next…
Whatever we are following is based on predictions. And at every point of time whatever we are predicting have only 50% probability that either it will be right or wrong.
In this type of market where we have 50% probability to win how can we manage to make money? My answer is simple but hard to follow.
My answer is “Risk Management”. Just focus on your risk management. You don’t need anything else other than risk management to generate some consistent return here. But How to manage your risk?
Risk Management is not just a word. It carries so many other terms in it like How much max loss you can effort to take in a single trade? What should be your position sizing for that particular trade? What should be your entry and exit plans? and How will you manage your trade if something goes wrong? You have to create a system that can handle all these things and can help you to take some better decisions.
When I start my trading career, I have started with Option buying. I think we all started with option buying thinking that it’s cheap. But actually it’s a very expensive thing if you don’t know about the option pricing and the factors which drive option premium like greeks and implied volatility.
Later I have shifted to futures and keeping my stop loss to limit my risk. But the problem with futures is, if you are carrying an overnight position, Stop Loss will not work. Even a small 1-3% gap Up or Gap Down can hit you badly.
I was looking for a solution like if I want to keep my risk let say 4000₹ per trade then my loss should not be more than 4000₹ in any situation. Here I found Option hedging strategies. Here are some benefits with comes with these Option hedging strategies:
- Limited Risk: These option hedging strategies not only help you to keep your risk on the limited side but will help to generate some consistent return without any worry of any black swan event.
- Easy to manage: Strategies like Iron Condor can help to manage your risk very well and it’s easy to handle too. Many time’s in my other articles I shared that profit will only come from how well you manage your trade. Place a trade or a strategy is just one part. If you don’t know how to manage that trade, it will be very difficult to generate consistent returns.
- Easy to optimize: Once I have started trading with options hedging strategies I found that If we know how to deal with Options in a proper way, we can do wonders. The best part is you can optimize these strategies anytime based on your own risk-taking ability.
- As we both know everyone has their own risk-taking capacity. You don’t need to trade based on someone else risk-taking ability. Just a few optimizations and your work are done.
- Easy to Optimize: you don’t need to bother about where the market will be tomorrow or the day after tomorrow. If the script is moving against your prediction, just a few adjustments and your work are done.
Your life will be much easier now. You can keep yourself calm in any situation and can take some better decisions if things are going wrong. There are 100s of articles freely available to understand how these strategies work. We too sharing many strategies on our website.
If want to learn these strategies, optimization, and adjustments from me and wanted to trade under my mentorship, can enroll in our Option Strategies – A Mentorship Program
Nifty Weekly analysis with Options strategy
In my last Nifty weekly analysis post, I have shared that 9100 – 8800 is acting as a resistance. This week we saw a good upside rally and Nifty managed to close at 9111.90.
Last week I shared that that close above 9100 will trigger a buy signal in Nifty. Does that mean we should place a long trade in Nifty?
I think we should wait for some more time. You can see based on the Fibonacci retracement tool 8967 – 9630 is the reversal zone so we have to wait till nifty gives us a breakout from 9630. Small precaution is better than cure.
Right now the market is highly volatile. So some safe bet should be our priority. On the downside, 8000 & 7000 are acting as an immediate support level. A breakout will lead to further levels.
The range for this week looks like 9600 – 8000 based on the current data and chart setup.
Nifty weekly Options Chain analysis
Based on option chain data, the highest Open interest stands at 9500 CE & 8500 PE, followed by 1000 CE & 9000 PE. PCR of all strikes is 1.48, which indicates an overbought market. PCR at 8500 stands at 9, which is acting as an immediate support level.
The Put-call ratio at 9500 stands at 0.08, which is acting as a resistance level. Equally, important indicator Option Pain is at 9000, indicating weekly expiry at 9000. A shift in option pain will provide further levels of expiry. So keep tracking max pain.
Significant open interest buildup on both the side, which indicates that the market is facing support from both the side.
Keep tracking open interest to analyze market participant’s behavior. If you don’t know how to analyze open interest for weekly option hedging strategies. Just enroll for our Option Strategies – A Mentorship Program.
Nifty weekly Options Strategy: Iron Condor
Initially, you can keep a stop loss of 9500 & 8500 for this strategy. Means square off if you find nifty is giving a breakout or breakdown. Or you can do this adjustment too.
If you find that Nifty is giving a breakdown and sustaining below 8500 then square off 9400 CE & 9600 CE in profit, and short 9000 CE and buy 9200 CE.
The same thing you can do with put spread means if you got a breakout from 9500. You can shift your put spread to 400 points up.
If you want to learn these strategies and their adjustments in more practical ways with live mentorship, You can enroll in our Option Strategies – A Mentorship Program(33% OFF).
BankNifty Weekly Analysis with options strategy
We saw a sharp correction in Bank Nifty. Banknifty broke its major support zone (23000 – 20700) made a new 3-year low. Now 23000 – 20700 is acting as the strong resistance zone. A breakout from this zone will give us a new buy signal to go long.
On the downside, the Next crucial support level is 17500. A breakout from 17500 will lead to 13500. 13500 looks scary and I feel Bank nifty should sustain around current levels, but nowadays sentiments are totally weak so it’s too early to say anything.
So better trade with proper hedge and keep your positions with limited risk on both sides.
Bank Nifty Weekly options chain analysis
Based on option chain data, the highest Open interest stands at 21000 CE & 18000 PE, followed by 20000 CE & 19000 PE. PCR of all strikes is 1.3, which indicates an overbought market. PCR at 19000 stands at 2.87, which is acting as an immediate support level.
The Put-call ratio at 21000 stands at 0.07, which is acting as a resistance level. Equally, important indicator Option Pain is at 19500, indicating weekly expiry at 19500. A shift in option pain will provide further levels.
If you don’t know how to analyze open interest. Just enroll for our Option Strategies – A Mentorship Program.
BankNifty Weekly Options Strategy: Iron Condor
If you find that BankNifty gives a breakdown and sustaining below 18700, then Shift your Call spread to 1000 points down.
The same thing you can do with put spread means if you got a breakout from 20700. You can shift your put spread to 1000 points up.
If you want to learn these Weekly expiry option strategies and their adjustments in more practical ways with live mentorship, You can enroll in our Option Strategies – A Mentorship Program(33% OFF).
Much Check this also– Performance of the Option strategies, Nifty & BankNifty Weekly Analysis with Option strategy, Nifty Option Strategy for Budget Session, A low-risk options strategy in LICHSGFIN, An iron condor options strategy in ICICIBANK, Reverse Jade Lizard options strategy in UPL, A high probability options strategy in YESBANK
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*( Please avoid any question like which Call or Put we should buy in the coming week).
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On September 01, 2019, We have launched a new mentorship program for Option strategies, in which we’ll discuss how can we deploy these strategies? What rules we should follow before taking a trade? And what should be our adjustments if the script is moving against your direction?
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DISCLAIMER: – we are not a SEBI research analyst. Views posted here only for educational purposes. There is no liability whatsoever for any loss arising from the use of this product or its contents. This product is not a recommendation to buy or sell, but rather a guideline to interpreting specified analysis methods. This information should only be used by investors and traders who are aware of the risk inherent in securities trading.