Weekly Analysis Option Strategies For 10th Oct Exp

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Hello guys. I hope you all are doing good. The market is highly volatile. In fact, 2019 is the year of high volatility. In my weekly analysis option strategies post, I’m sharing that we should trade with proper risk management.

Risk management is the only holy grail to get success in this stock trading. So analyse your risk profile first and choose a product or segment to trade based on your risk profile.

This week was highly volatile. We saw some big movement in both the directions the week. In this type of market, very difficult to make a directional bias, so better we should trade with limited risk strategies.

Because volatility is high, so premiums also high and when premiums are high, time to create some credit spreads. But we have to limit our risk too.

On the upside, you can keep extra risk but on the downside, your risk must be blocked. The reason is: You will get time to adjust in the upside movement but downside movement will not give you time to adjust your positions.

In simple words, Downside movement is always strong compare to upside movement, so we have to lock our risk on the downside. Choose your strategies accordingly.

Let’s come to our weekly analysis and option strategies for 10th October Expiry. Let’s look at the chart first,

Nifty Weekly analysis and option strategies

Nifty chart and weekly analysis

After the surprise announcement by our Finance minister Smt Nirmala sitaraman, We saw a huge recovery in the market and nifty close up almost 5% in September expiry.

But most of the recovery vanished even in the starting of October expiry. We saw a big downside movement from high levels.

On 4th October, when RBI cut 25 BPS, we saw a sharp decline in the index because 25 BPS is already discounted by Index and market was expected some 40 BPS cut as a positive sign.

As I shared in my last weekly analysis and Option strategies post, 200 Days Simple moving average is a strong support level for nifty, if nifty manage to hold this level we can expect some more recovery to higher levels.

Below 200 Days SMA, the trend will change again to downtrend and we may go to the same levels again from where we started our upside journey.

Second support after 200 DSMA is 11150, which will act as the last hope or can say make or break level for nifty.

Personally I’ve not convinced this upside rally and expecting some downside levels. Reasons are:

  • My first reason is, if we look at the scripts, only a few scripts which are fundamentally strong, specially Nifty-50 scripts have contributed this rally. Instead of Value buying, it looks like a promoter’s activity.
  • Second reason is, FIIs are not participating. If we can understand this small thing that this is very positive for the market, Is it very difficult to understand for FIIs? Are we smarter than FIIs?

These two reasons are enough to understand that still, we haven’t got that value-buying, we need to get a sustainable recovery.

So better we should keep more focus on fundamentally strong scripts and we should not jump in aggressive buying. See there is always a good time to invest in fundamentally strong scripts. So we have to focus on these only.

Nifty option chain analysis

Based on option chain data, the highest Open interest stands at 11400 CE & 11200 PE, followed by 11500 CE & 11300 PE. PCR of all strikes is 0.59, which indicates an oversold market. PCR at 11200 stands at 2.23, which is acting as an immediate support level.

The Put-call ratio at 11400 stands at 0.28, which is acting as a resistance level. Equally, important indicator Option Pain is at 11300, indicating weekly expiry at 11300. A shift in option pain will provide further levels.

Significant open interest buildup at 11300 CE, which indicated the market will give us some more downside levels.

If you don’t know how to analyze open interest. Just enrol for our Option Strategies – A Mentorship Program.

Nifty Option strategy: Bull call ladder

Nifty weekly Option Strategy

Now before initiating this strategy, You should keep in mind that It’s an unlimited risk strategy so do not initiate if you don’t know how to adjust this strategy or you are a beginner. Simply avoid this strategy. It required timely adjustments because the upside range is narrow so track actively.

Possible adjustments:

Once Nifty hit 10350, you can square of 11350 and short a new call of 11450 strike. Same you have to do with 11400, means if nifty hit 11400 square off 11400 and short a new call 11500. Keep 11300 as it is.

Bank nifty weekly analysis & Option strategies

Bank Nifty chart today

We saw a huge decline in bank nifty in this week. Bank Nifty broke 200 Days Simple moving average and now trading below this level, which is giving a complete downtrend setup again.

On Friday, after 25 BPS rate cut by RBI, we saw a huge decline in Bank nifty. Lost almost 1000 points from day’s high.

1000 points in a day are looks like quite normal for bank nifty. In this type of market is you are trading with short straddle or strangle and you don’t know how to adjust your position, It will be like a nightmare to make money in this highly volatile market.

Based on Bank nifty chart, 27600 is a strong support level, if it manages to sustain we, may see some rangebound activity here.

Because Bank nifty is trading below its 200 DSMA, we should keep our strategy as “Sell-on-Rise”. The overall trend is still weak, so keep your risk management on the higher side.

Bank Nifty option chain analysis

Based on option chain data, the highest Open interest stands at 29000 CE & 27000 PE, followed by 30000 CE & 28000 PE. PCR of all strikes is 0.49, which indicates an oversold market. PCR at 27500 stands at 8.09, which is acting as an immediate support level.

The Put-call ratio at 29000 stands at 0.09, which is acting as a resistance level. Equally, important indicator Option Pain is at 28300, indicating weekly expiry at 28300. A shift in option pain will provide further levels.

You can see the range is quite big (Almost 2000 points). So we can expect some huge movement in the coming week in Bank nifty. Better keep your back up plan ready.

If you don’t know how to analyze open interest. Just enrol for our Option Strategies – A Mentorship Program.

Bank Nifty Option strategy: Bull Call Ladder

Bank Nifty option Strategies

Now before initiating this strategy, You should keep in mind that It’s an unlimited risk strategy so do not initiate if you don’t know how to adjust this strategy or you are a beginner. Simply avoid this strategy. It required timely adjustments because the upside range is narrow so track actively.

Possible adjustments:

Once Bank Nifty hit 28300, you can square of 28300 and short a new call of 28900 strike. Same you have to do with 28600, means if nifty hit 28600 square off 28600 and short a new call 29200. Keep 28000 Call as it is.

Post your comments in the comment box if you have a query related to Bank nifty option strategy. You can ask any question related to options trading in the comment box.

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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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