Weekly Analysis and Option Strategy For 26th July – 2nd August 2019

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Weekly analysis and option strategy for 26th July – 2nd August 2019

Hello guys, hope you are doing good. We saw some range-bound activity this week although movement was high, which have created lots of problems. In our Last weekly analysis and option strategy post, we initiate a directional trade which gave around 2% return. The market is going based on sentiments nowadays. The market is not following any data or any technical. In this type of market, Chances are very high to lose money. So better trade with proper risk management.

Never under-estimate market. Take a pre-calculated risk and avoid any unlimited risk strategies. When we are dealing with option writing, there are very fewer chances to make a mistake, and your one mistake can hurt you very badly.

Sentiments are fragile in the market. FIIs are selling continuously. DIIs too can’t support the market for a longer time. Results are not that impressive. Large-cap stocks have started their downward journey. Nifty PE is trading at a higher level. Every day we see a new fraud in the banking sector. There is so much pressure due to globally sentiments too.

So reasons are many which are supporting this fall. Now we need to watch where the market will take support. Till then focus on fundamentally strong stocks and keep your positions with a proper hedge.

Nifty chart this week:

Nifty Chart

Nifty gave a powerful breakdown on Friday, and from Friday we saw continuous downside movement which drags nifty to 11200 levels. As I shared in my last weekly analysis and option strategy post, if nifty manages to sustain below 11450, then next target should be 11355 & 11155. Both almost hit. Now, 11200-11000 is an active support zone, and I’m expecting Nifty to hold this level. We may see some short-covering from here. Nowadays, sentiments are plying significant role, so any quick movement in either direction should not be neglected.

On upper side 11450-11600 is the active resistance zone. We may see some upside rally only after a successful breakout. So if you are planning to initiate a short position, you should wait for a small recovery and short at slightly higher levels.

Open Interest Analysis:

Based on option chain data, the highest open interest stands at 11300 CE & 11200 PE followed by 11400 CE & 11300 PE. PCR of all strikes is 0.96, which is a neutral zone. PCR at 11200 stands at 5.94, which is acting as an immediate support level, PCR at 11350 stands at 0.13, which is acting as a resistance level. Equally, substantial indicator Option Pain is at 11300, indicating weekly expiry at 11300. A shift in option pain will provide further levels.

Based on the Option chain data, Resistance levels are 11350 & 11400, and Support levels are 11200 & 11100. So the expected range based on current data should be 11200 – 11400. There is substantial open interest buildup around 11200 CE & 11300 PE. Excepting bank nifty to remain in a range of 11200-11400 in the coming week as per current data. Need to track closely for any further shift in range.

Nifty Weekly Option Strategy: Iron butterfly

Nifty Option StrategyAdjustments not required for this strategy. Just book loss and close this strategy once it breaches break-even points. If you still want to make some adjustments, just shift Call spread to 100 points down after a breakdown from 11200. Keep put spread as it is. Same thing you can do with put spread after a successful breakout from 11400.

Bank nifty chart this week:

Bank nifty chart today

After a sharp decline, we saw some short covering in bank nifty.  29000-28500 is acting an active support zone. Need to hold for some recovery from here. On the Upperside, Based on 100 days simple moving average 30000 will serve as a healthy resistance level.

For the next couple of weeks, 29000-30000 should be our range if the bank nifty is not giving any breakout or breakdown. So make your positions based on this range.  The overall trend is weak, but for a new short trade, we should wait for some recovery.

BankNifty Open Interest Analysis:

Based on option chain data, the highest open interest stands at 29500 CE & 29000 PE followed by 30000 CE & 28500 PE. PCR of all strikes stands at 1.1, which is a neutral zone. PCR at 29000 stands at 5.50, which is acting an immediate support zone. PCR at 29500 stands at 0.12, which is acting as an immediate resistance zone. Option pain stands at 29200, giving us expiry level. Keep tracking this option pain level. A shift in option pain will provide a new level for expiry.

Bank Nifty Weekly Option Strategy: Iron Butterfly

Bank Nifty Option StrategyAdjustments not required for this strategy. Just book loss and close this strategy once it breaches break-even points. If you still want to make some adjustments, just shift Call spread to 300 points down after a breakdown from 28950. Keep put spread as it is. Same thing you can do with put spread after a successful breakout from 29450.


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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.

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