Hello Folks! I hope you are doing great. Nowadays, when the market is highly volatile, it’s more important that you should follow your risk management rules very strictly. In my every weekly analysis with Nifty and Bank Nifty options strategy post, I’m sharing some tips which I’m following to manage my risk. So read this post till the end to get some of the answers.
We know 70% times market consolidate in a range. This range can be wide or small based on the volatility. If volatility is high, range will also wide and if volatility is low, range will be small. You can calculate the daily or weekly range based on IV with the help of below formula:
With the help of the above formula, you can easily calculate the daily, weekly, or monthly range. Let’s understand this with an example. Right now, IV of Nifty is 29. So the daily range should be 29/16 = 1.81%. Means Nifty can go 1.80% in any direction in a day.
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Now how can we manage our risk based on the range we have calculated? You know what should be the range for a week, you can easily create a limited risk range-bound strategy based on the high range. It will help to make a proper plan based on your risk management rules.
One thing you should keep in mind when IV is high you can get so many wild movements in any direction. It’s very important that you have a system that is managing your risk properly. You can’t trade with naked short positions (Call/Put) or any unlimited risk strategy like a short straddle or strangle.
These unlimited risk strategies can give your high return, but just one bad trade in a year can blow your entire account, and believe me, no one can help at that time. So better keep your focus only on limited risk range-bound strategies only in your initial day. At least you know how much max you can lose with these Limited-risk range-bound strategies.
Nifty weekly analysis with Nifty options strategy
After a good rally from lower levels, Nifty is taking some rest and trying to sustain above its psychological levels of 10000. This level is very important in terms of short to medium-term trends.
If Nifty manages to sustain above this level, we may see some higher levels very soon. As I shared in my last weekly post, let it sustain above 10250 – 10300 to initiate a long trade in nifty. Right now nifty is in the No-trade zone and a breakout from 10250 will bring new opportunities to go long in the market.
On the downside, 9650 is acting as a strong support level. A breakdown from 9650 will again drag nifty into the territory of the bears. Based on the chart, 10250 – 9650 can be the range for the coming sessions.
Nifty weekly Options Chain analysis
Based on option chain data, the highest Open interest stands at 10500 CE & 1000 PE, followed by 10200 CE & 9800 PE. PCR of all strikes is 1.03, which indicates a neutral market. PCR at 9800 stands at 5.83, which is acting as an immediate support level.
The Put-call ratio at 10200 stands at 0.16, which is acting as a resistance level. Equally, important indicator Option Pain is at 10000, indicating weekly expiry at 10000. A shift in option pain will provide further levels of expiry. So keep tracking max pain.
Significant open interest buildup on PUT side, especially 9800 PE, 9900 PE, 10000 PE, and 10100 PE. Indicating that Nifty is facing good support around 10000 levels. So based on the OI, the possible range for this week should be 9800 – 10300.
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 9850 & 10400 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 9800, then square off call spread and bring it down to 300 points lower levels.
The same thing you can do with put spread means if you got a breakout from 10400. You can shift your put spread to 300 points up.
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Weekly Analysis with Bank Nifty options strategy
After a good rally from lower levels, Bank Nifty is trying to face resistance around 20700 – 21000. Banknifty is trading in it’s resistance zone. So any long trade is not advisable here.
Based on Fibonacci retracement levels, If 20700 is the 38.2% retracement level. If banknifty manages to sustain above 20700, next targets can be 23000, which is a 50% retracement level.
Here, We should not forget about the previous high which is at 22000. If banknifty wants to go higher, it should give the brekouts from all these resistance levels.
As per the current market scenario, when there is no clear indication about the trend, so we should focus more on range-bound strategies. Bank nifty options range-bound strategies can give you a better risk and reward.
Bank Nifty options chain analysis
Based on option chain data, the highest Open interest stands at 22000 CE & 20000 PE, followed by 21000 CE & 19000 PE. PCR of all strikes is 0.92, which indicates a neutral market. PCR at 20000 stands at 7.96, which is acting as an immediate support level.
The Put-call ratio at 21000 stands at 0.3, which is acting as a resistance level. Equally, important indicator Option Pain is at 20700, indicating weekly expiry at 20700. A shift in option pain will provide further levels.
Remember one thing: When IV is high, data can change anytime so keep following more closely.
If you don’t know how to analyze open interest. Just enroll for our Option Strategies – A Mentorship Program.
Bank Nifty Options Strategy: Iron Condor
If you find that BankNifty gives a breakdown and sustaining below 20000, 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 21500. You can shift your put spread to 1000 points up.
If you want to learn these bank nifty options strategy and their adjustments in more practical ways with live mentorship, You can enrol in our Option Strategies – A Mentorship Program(33% OFF).
Much Check this also– Performance of the Option strategies, Nifty & BankNifty Weekly Options 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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DISCLAIMER: – we are not a SEBI research analyst. Views or the nifty and bank nifty options strategy 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.