Weekly Analysis and Option Strategy For the 27 – 31 May 2019
How are you? Hope you did well in this highly volatile event.
In this type of event where we can’t predict trend, momentum or volatility, it’s very difficult to maintain our risk. But Risk management is the only key success in this market. So keep trying.
Now a days we saw so many peoples are involved in option Writing, but keep one thing in mind, option Writing is more dangerous compare to buying if you are not managing your risk. Your one wrong trade will hit you very hard. So keep more and more focus on risk management.
In this highly volatile week, we saw a sharp upside movement on Monday after most of the exit polls indicate that NDA is coming into government with full majority. On Tuesday and Wednesday we saw some range bound activity. On Thursday Market made a new all time high in first half but in second half we saw a sharp decline and index loose most of the gain and close almost 4% down from its all time high. On Friday market recovered from low and again we saw a decent rally and closed with a gain around 1.50%.
This is what we were expecting from this market. A high Volatility session. This week we saw a huge downfall in Volatility which was not expected. But this is market, always unpredictable specially on these types of events. Now India VIX is trading at 14.89 after a fall of 50% in just 2 days. Indicates a stable market.
After a huge win by NDA in general election, uncertainty is also over. Now market will focus on growth, earnings and other macro factors.
Based on charts:
Nifty still holding it’s previous high of 11856. But as we know that NDA is forming a stable government, and that’s what market wants, a stable government, we can see that FIIs already started their buying. So bias are positive. There are some macro factors too which are creating some pressure like slow consumption Growth, crude prices etc. Need to watch how market will react on this in coming sessions.
So as per charts 11800-12000 is strong resistance zone, only breakout from 12000 will lead to further levels. I suggest do not create a new long positions until Nifty is not moving above 12000. On downside 11500 and than 11000 is acting a strong support levels.
What can we expect from coming sessions?
As per my analysis, m expecting some range bound activity from here. Market will move between 12000-11500, this is the range I’m expecting for next few sessions.
Open Interest Analysis
Based on option chain data, highest open interest stands at 12500 CE & 11000 PE followed by 12000 CE & 11500 PE. PCR of all strikes is 0.85 which is a neutral zone. PCR at 11700 stands at 2.06 which is acting as a immediate support level, PCR at 11900 stands at 0.33 which is acting as a immediate resistance level. Equally important indicator Option Pain is at 11700, indicating expiry at 11700. A shift in option pain will provide further levels.
Weekly strategy: Iron Condor
Possible adjustments : Breakout from 11970, shift Put Spread to sell 11900 PE & 11750 PE buy. Same as shift call spread to Lower levels after a breakdown from11680., New position will be sell 11750 CE & BUY 11900 CE.
BANKNIFTY IDX: 31212.55
Banknifty made a new high on Thursday. As I shared in my previous weekly analysis and Option Strategy post, that 31150 – 31850 could be retracement zone. Need to break for more upside levels. If Banknifty is giving a breakout from 31850 than only we should place a new long position. Overall trend Is Up and we saw some good buying in banking sector so bias are positive and we can see some higher levels in coming sessions.
Open Interest Analysis:
Based on option chain data, highest open interest stands at 31500 CE & 30000 PE followed by 30500 PE & 32000 CE. PCR of all strikes stands at 1.11 which is a neutral zone. PCR at 30900 stands at 2.15, which is acting a immediate support zone. PCR at 31300 stands at 0.17 which is acting as a immediate resistance zone. Option pain stands at 30500, giving us expiry level. Keep tracking this option pain levels. Shift in option pain will give us new level for expiry.
Weekly strategy: iron condor
Possible adjustments: same as we did in previous strategy. Breakdown from 31100,shift call spread to lower level and breakout from 31895,shift put spread to higher levels.
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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.