Nifty likely to meet resistance at 5300

MUMBAI: Volatility is seen rising next week as June futures and options series expire on Thursday. Traders are not expecting Nifty to rise above 5300, with 5300 June calls, as they are seeing a huge open interest build-up. Nifty 5200 puts also saw a build-up in open interest, suggesting short-term support for the index. Though RIL fell on Friday as its AGM did not make announcements that the market expected, analysts feel there is some more steam left in the stock.

NIFTY
CMP: 5262.60
Strategy: Put Backspread
Buy 1 June 5300 put @60.95 Rs 3,047.50
Sell 2 June 5200 put @22 Rs 2,200
Lot size:50
Net premium paid (50*16.95) Rs 847.50

Though in this strategy, chances of profits are limited, the possibility of losses is unlimited. The strategy involves buying an in-the-money put and selling two out-of-the-money puts (below current market price). The maximum profit for the trader will be the difference in the spread (5300-5200) plus the premium received (Rs 44) by selling the 5200 options. This is deducted with the premium paid for buying the 5300 put ((100+44)-60.95=83.05)).

The maximum profit here will be Rs 4,152.50 (83.05*50), if the Nifty expires at 5200, as both the options sold will be worthless. Losses to the extent of the net premium paid will have to be incurred if the Nifty closes between 5283.05 and 5300 ((5300-16.95)). Beyond 5300 levels, there will be no losses while on the downside below 5116.95 (5200-83.05) losses will have to be incurred.

RELIANCE INDUSTRIES
CMP: 1051.20
Strategy: Call Condor
Buy 1 June 1060 call @9.25 Rs 2,775
Sell 1 June 1080 call @4.40 Rs 1,320
Buy 1 June 1120 call @1.25 Rs 375
Sell 1 June 1100 call @2.40 Rs 720
Net premium paid (300*3.70) Rs 1,110

It’s an options strategy with limited risks. The maximum profit in this strategy will be the difference in the
spread deducted by the net premium paid to enter the strategy. RIL lot size is 300. So the maximum profit for the investor will be Rs 4,890 ((20-3.70)*300) if the stock expires between 1080 and 1100.