Nowadays the market is highly volatile. The major reason is this Covid-19 pandemic. In this highly volatile market, When the market is totally unpredictable, what should be our strategy to trade? Today in our weekly options strategies post, we will discuss, how can we deal with this highly volatile market?
When the market is unpredictable, first this we should focus on is, “how to limit your risk?”. Because when we can’t predict the trend, we don’t know where the market will be tomorrow or in the coming week.
In this type of market, when the market is going both the direction like the day before yesterday it was open Gap-down by 3%, yesterday it opened 2% Gap-up and now today, it’s again 4% gap-down (we are assuming this movement). In this type of unpredictable market, If you are trading with directional strategies, chances are high that you will trap in a zig-zag movement.
Despite this zig-zag movement, one thing we can observe is, that still market is trading in a range. Still, it is respecting both, the support and the resistance. So what should be our weekly options strategies in this type of market?
I suggest, if you can’t predict the market, better we should trade with limited risk range-bound strategies. There are 2 major reasons to trade with these limited risk range-bound weekly options strategies are:
- You don’t need to predict the trend or direction of this market. Just find the range based on support and resistance on charts and confirm it with the Open interest data.
- The second reason is: When IV is high, that means the option premiums are also high. High premium gives you a chance to sell options and collect more premiums. But if you can’t sell options naked at this time because risk will be very high with naked options. So best weekly options strategies are credit spreads like an iron condor, butterfly, iron butterfly etc.
One more big reason to trade with non-directional limited risk strategies is: Because your risk is limited on both sides. That means you already know how much max you can lose in that particular strategy. Now it will be very easy for you to manage that trade, You can do the proper adjustments if the script is moving beyond your calculated range,
You can easily bring your risk to breakevens because you are not loosing unlimited and you need to collect a small premium to convert this strategy into a no loss strategy. (no loss strategy means you are closing a strategy at breakeven or with a nominal loss.)
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Nifty analysis with weekly options strategies
As we know, the market is highly volatile nowadays. We can’t predict the exact direction but if you look at the chart, you can easily draw some levels for your reference. In this weekly options strategies post, I’m sharing some of my reference levels.
As you can see, 9500 – 9000 is the range in which Nifty is trading right now. Now overall trend is down and if we got a breakdown from 9000, we may see some downside levels. But where we need to react?
As per my analysis, if we got a breakdown 9000, we should not initiate a short just after a breakdown, I suggest we should wait for some confirmation. Confirmation in the sense like: 8950 – 8650 should be our no trade zone, We will initiate a new short trade if we find that nifty is sustaining below 8650 for the targets of 8050 and 7550.
On the Upside, 9650 should be our resistance or stop-loss for our short trades. If Nifty will trying to sustain above 9650, then only we should look for a reversal trend here.
Based on option chain data, the highest Open interest stands at 9500 CE & 9000 PE, followed by 9400 CE & 8500 PE. PCR of all strikes is 0.59, which indicates a slightly oversold market. PCR at 9000 stands at 3.21, which is acting as an immediate support level. Second support looks at 8800 with a PCR at 10+.
The Put-call ratio at 9500 stands at 0.05, which is acting as a resistance level. Equally, important indicator Option Pain is at 9100, indicating weekly expiry at 9100. 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 behaviour. If you don’t know how to analyze open interest for weekly options strategies. Just enroll for our Option Strategies – A Mentorship Program.
Nifty weekly Options Strategy: Iron Condor
Initially, you can keep a stop loss of 9350 & 8750 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 8750, 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 9350. You can shift your put spread to 300 points up.
BankNifty Analysis with weekly options strategies
Banknifty is in the complete downtrend. We were hoping that this economic package by Government will bring some cheers in the market but unable to impress the market especially the banking sector and we can Banknifty is going down day by day. What are some of the levels we can follow in the coming sessions?
As you know, Banknifty is in complete downtrend. Already in a territory to place a short trade. 20700 is the resistance level on upside or we can say 20700 should be our stop-loss for a short trade here.
Targets should be 17500 and 16000. I think 18000 – 17500 is the strong support zone and Banknifty should respect this support for coming sessions if there is no big negative news coming.
So 20700 – 18000 should be our range for coming trading session as per current chart setup and formations.
Bank Nifty Weekly options chain analysis
Based on option chain data, the highest Open interest stands at 20000 CE & 18000 PE, followed by 19500 CE & 17500 PE. PCR of all strikes is 0.71, which indicates a neutral market. PCR at 18000 stands at 10+, which is acting as an immediate support level.
The Put-call ratio at 19500 stands at 0.14, which is acting as a resistance level. Equally, important indicator Option Pain is at 19000, indicating weekly expiry at 19000. 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.
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Bank Nifty best Weekly Options Strategy: Iron Condor
If you find that BankNifty gives a breakdown and sustaining below 18000, 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 19500. You can shift your put spread to 1000 points up.
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Much Check this also– Performance of the Option strategies, Nifty & BankNifty Weekly Options strategies, 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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DISCLAIMER: – we are not a SEBI research analyst. Views or the weekly options strategies 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.