Nifty Feb expiry seen at 4800- 4900
Overall, Nifty is likely to trade in a range of 4800-4950 and we expect expiry to be in the range of 4800-4900.
Domestic indices have been plagued by weak sentiment although there has been a rebound on every decline. Overall, Nifty is likely to trade in a range of 4800-4950 and we expect expiry to be in the range of 4800-4900. Options concentration is at the 4800-strike put, with the highest open interest of above 58 lakh shares. This is followed by 4900 strike and 5000 strikes call with more than 71 lakh and 67 shares each in open interest, suggesting strong resistance around these levels.
Market rebound invited addition of short positions among puts and short closures in calls. Tuesday’s trading session saw maximum addition at 4800 strike put and on the call side we saw short unwinding at higher strike call, indicating possible bounce. The implied volatility (IV) of ATM March call options closed at 27.77% while the average IV of ATM put options ended at 28.5%, indicating higher option premium due to high option volatility. VIX and IV are also hinting at higher volatility in coming trading sessions.
Technically, Nifty has got support at 4800 levels and crucial resistance at 4950. The overall market cost-of-carry for March series is low-to-positive, with rollover of 35% in Nifty which is slightly lower than the previous expiry.
March series continued to trade at a discount indicating short positions. The put-call ratio of open interest increased marginally finally closing at 0.98 levels, indicating support at lower strikes. March series remained at a discount, indicating addition of short positions. Overall, Nifty is likely to remain range-bound for the current expiry and we recommend buying strangle (non-directional strategy) for March series, as we expect volatility and average true range of the market to rise from current level.
Buy one Nifty March 5000 CE @ 100 and also buy one March 4700 PE @ 95 at cumulative premium of 195. With the rise in volatility and ATR, we will see cumulative premium rising. The targeted cumulative premium for the above strategy is 260 and stop-loss is 165.
DK Aggarwal, MD & CEO SMC Wealth Mgmt Svcs, SMC Global
Market rebound invited addition of short positions among puts and short closures in calls. Tuesday’s trading session saw maximum addition at 4800 strike put and on the call side we saw short unwinding at higher strike call, indicating possible bounce. The implied volatility (IV) of ATM March call options closed at 27.77% while the average IV of ATM put options ended at 28.5%, indicating higher option premium due to high option volatility. VIX and IV are also hinting at higher volatility in coming trading sessions.
Technically, Nifty has got support at 4800 levels and crucial resistance at 4950. The overall market cost-of-carry for March series is low-to-positive, with rollover of 35% in Nifty which is slightly lower than the previous expiry.
March series continued to trade at a discount indicating short positions. The put-call ratio of open interest increased marginally finally closing at 0.98 levels, indicating support at lower strikes. March series remained at a discount, indicating addition of short positions. Overall, Nifty is likely to remain range-bound for the current expiry and we recommend buying strangle (non-directional strategy) for March series, as we expect volatility and average true range of the market to rise from current level.
Buy one Nifty March 5000 CE @ 100 and also buy one March 4700 PE @ 95 at cumulative premium of 195. With the rise in volatility and ATR, we will see cumulative premium rising. The targeted cumulative premium for the above strategy is 260 and stop-loss is 165.
DK Aggarwal, MD & CEO SMC Wealth Mgmt Svcs, SMC Global
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