We can see very high volatility in the market nowadays due to coronavirus pandemic. In this article, I’m trying to find what could be the next support and resistance for nifty and bank nifty in the coming week along with one weekly options strategy for each index. Read this article till the end.
Before going further let us talk about some major development for this week. Nifty and Banknifty both made a new 3-year low breaking all the crucial support levels this week.
There are three major reasons behind this fall. One is Crude oil price war, second is Yesbank crises and the third one is coronavirus pandemic. The major reason behind this global sell-off is the coronavirus pandemic, which crossed 200000 cases globally. This is the first time we saw this type of sharp fall in just 2-3 weeks.
SEBI makes short-selling tough.
The Securities and Exchange Board of India (SEBI) on March 20 announced measures to make short-selling of stocks difficult in order to counter the market volatility triggered by the coronavirus outbreak. Detailed article here
After this move by SEBI, we may expect volatility will come down in the coming weeks. Due to the decrease in volatility, option prices will also come down which will help to take proper hedge for the portfolios. Nowadays due to high premiums, hedge cost is very high.
This step will reduce volatility only. This is not for the movement. The market can go UP or down anywhere. So don’t correlate this step with the market movement. Yes, the Intraday swing will decrease.
Is it the right time to invest in the equity market?
I feel This is just the beginning, the real impact we will see in the balance sheets of the companies due to this global lockdown. Earnings will suffer, economic activity has come to a standstill and many businesses are completely scared and impacted by this.
But we should not stop investing in the equity market. Because many good businesses are at attractive rates and once things settle down, we may see a sharp recovery in the market. So Invest at every fall for your long-term portfolios.
Many were asking that Where to invest here? If you don’t know about fundamentals and can’t read the balance sheets, the best way to invest is through ETFs. You can buy Nifty 50 BEEs. It will give you better diversification and your money will be in the top 50 companies in India.
One more thing we should keep in mind here. That is asset allocation. Proper asset allocation is important to reduce the impact of this high volatility. If you are investing through Nifty 50 BEES, You can buy some GOLD BEES and Liquid BEES too. Like 60% in Nifty BEES, 20% in GOLD BEES and 20% in Liquid BEES.
Nifty Weekly analysis with Options strategy
We saw a sharp decline in Nifty in the last 4 weeks. Nifty broke it’s crucial support level at 9100 – 8800 which much effort. Although we saw a sharp recovery from the new 3-year low at 7832.55 in the last 2 trading sessions but fear is still there.
The overall trend is down and the next support zone can be 7000 – 6200. In this market, where there is no clear indication and market is trading based on sentiments, I suggest better trade with proper risk management. And option hedging strategies are the best solution to keep your risk limited in any circumstances. You can enroll in our Option Strategies – A Mentorship Program (33% OFF) to learn and adjust these strategies.
Nifty weekly Options Chain analysis
Based on option chain data, the highest Open interest stands at 12000 CE & 8000 PE, followed by 10000 CE & 9000 PE. PCR of all strikes is 1.05, which indicates a neutral market. PCR at 8000 stands at 3.56, which is acting as an immediate support level.
The Put-call ratio at 10000 stands at 0.61, which is acting as a resistance level. Equally, important indicator Option Pain is at 8900, indicating weekly expiry at 8900. 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. Now we have to follow what changes we will get on Monday for further confirmation about the range for this week.
Keep tracking open interest to analyze market participant’s behavior. If you don’t know how to analyze open interest for weekly options strategy. Just enroll for our Option Strategies – A Mentorship Program.
Nifty weekly Options Strategy: Iron Condor
Initially, you can keep a stop loss of 9500 & 8000 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 8000 then square off 9500 CE & 9800 CE in profit, and short 8500 CE and buy 8800 CE.
The same thing you can do with put spread means if you got a breakout from 9500. You can shift your put spread to 1000 points up.
If you want to learn these strategies and their adjustments in more practical ways with live mentorship, You can enrol in our Option Strategies – A Mentorship Program.
Bank Nifty Weekly Analysis with options strategy
We saw a sharp correction in Bank Nifty. Banknifty broke its major support zone (22000 – 20500) last week and made a new 3-year low. Now 22000 – 23500 is acting as the strong resistance zone. A breakout from this zone will lead to further upside levels.
On the downside, the Next crucial support zones are 18000 – 16500 and 13500 – 11000. I feel Bank nifty will sustain around 18000 – 16500 but nowadays sentiments are totally weak and it’s too early to say anything.
So better trade with proper hedge and keep your positions with limited risk on both sides.
Bank Nifty Weekly options chain analysis
Based on option chain data, the highest Open interest stands at 25000 CE & 18000 PE, followed by 23000 CE & 20000 PE. PCR of all strikes is 0.58, which indicates a slightly oversold zone. PCR at 19000 stands at 3.13, which is acting as an immediate support level.
The Put-call ratio at 22000 stands at 0.1, which is acting as a resistance level. Equally, important indicator Option Pain is at 20100, indicating weekly expiry at 20100. A shift in option pain will provide further levels.
If you don’t know how to analyze open interest. Just enroll for our Option Strategies – A Mentorship Program.
Bank Nifty Weekly Options Strategy: Iron Condor
If you find that BankNifty gives a breakdown and sustaining below 17700, then Shift your Call spread to 1500 points down.
The same thing you can do with put spread means if you got a breakout from 22300. You can shift your put spread to 1500 points up.
If you want to learn these Weekly expiry option strategies and their adjustments in more practical ways with live mentorship, You can enroll in our Option Strategies – A Mentorship Program(33% OFF).
Much Check this also– Performance of the Option strategies, Nifty & BankNifty Weekly Analysis with Option 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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*( 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 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.