THE WEEK PAST:
- High put option open interest build up of around 8.5 mn and 7.3 mn is seen at 5700 and 5600 strikes respectively, indicating that they will act as strong supports.
- High call option open interest build up of around 9.3 mn and 5.5 mn is seen at 6000 and 6100 strikes respectively, indicating that they will act as strong resistances.
- Nifty is trading at a premium of 18-19 points as compared to a premium of 9-10 points as of the previous trading week.
- The PCR for Nifty based on open interest was up at 1.45 as compared to 1.30 as of the previous trading week.
- The PCR for Nifty based on Volumes was down at 1.22 as compared to 1.04 as of the previous trading week.
- Nifty Futures open interest saw a increase of around 0.11%.
- In Index Futures FII’s were net sellers to the tune of ` 724 Cr with an open interest decrease of around ` 704 Cr as compared to net selling of ` 2817 Cr with an open
- interest increase of around ` 304 Cr as of the previous trading week.
- Long build up was seen in Telecom and Media.
- Short build up was seen in Textiles and Capital Goods.
- Short Covering was seen in Auto, Banking, Cement, FMCG, Oil & Gas, Metals, Pharma, Power, Finance, Chemicals & Fertilizers, Sugar and Shipping.
- Long Unwinding was seen in IT, Infra and Real Estate.
5800 Call option witnessed significant closure suggesting 5800 may remain a good support on a closingbasis. The Nifty April 6000 Call has the highest open interest base, which indicates the Nifty may find it tough to sustainabove the intermediate high of 5950.
The following are different strategies in options trading from KARVY:
Nifty: With implied volatility levels remaining nearly constant in the last few sessions, along with short accumulation in the 5,800-strike put option and the 6,000-strike call option, we expect Nifty April futures to expire around 5,900-6,000 levels.
Bank Nifty: The Index ended on a positive note, surging 1.36% W/W, and outperforming the broader markets. On the F&O front, Bank Nifty added 4.56% on Thursday and shed 1.21% week-on-week basis on the back of a fl at cost-of-carry, indicating addition of speculative short positions on the last trading day of the week. The index has its support around 11,700 and 11,500 levels, and is likely to face stiff resistance around 12,050 and 12,400 levels for the week.
OUR TAKE: The Nifty is expected to remain in a range of 5,800-6,000 levels, and a sustained move above 5,850 will guide the index towards higher resistances. However, in our view, in the current scenario, the Index is expected to see stiff resistance around 5,900-5,950 levels, while it may find support around the 5,800-5,850 zone to expire between 5,900-6,000 levels.
Nifty
Buy Nifty May futures @ 5,830-5,850* stop loss: 5,780* target: 5,930, 5,950* (*spot levels)
Nifty strategy
Sell one lot of Nifty May 5800 PE @ 90-95 and sell one lot of Nifty May 6000 CE @ 100-105; UBEP: 6190; LBEP: 5610; Max profi t: Rs.9500; TF: 10-12 days.
NIFTY OPTIONS:
Symbol Recomm Entry Stop Loss Target Time Frame
May6100C Short 60-65 6000 (Spot) 45-46 1 Week
May5700P Short 70-75 5780 (Spot) 48-50 1 Week
DIFFERENT STRATEGY:
Hybrid strategy:
Short Strangle in Reliance: Reliance has been trading in the range of 980-1060 for the last few weeks. Its results were below street
expectation, and, therefore, we expect the stock to remain rangebound in the coming weeks. On the options front, OTM call and
put options of the May series saw writing, indicating that the stock is likely to consolidate in a narrow range in the coming sessions. In
such a scenario, we advise a short strangle spread on the stock for the current series.
Sell one May 1060 call @ 23-25 and sell one May 1000 put @ 25-27; upper breakeven point: 1110; lower breakeven point: 950; max profi t: Rs12,500 if the stock expires in the range of 1000-1060 levels.
Bull Call Spread in Hindalco: Hindalco saw a sharp recovery last week and closed above all its moving averages. Moreover, ITM call
options of the May series saw buying, indicating that the stock is likely to trade on a positive note in coming sessions. In futures, the stock
saw accumulation of long positions. In such a scenario, we suggest a bull-call spread strategy on the stock for the current series.
Buy one May 220 call @ 9-10 and sell one May 230 call @ 7-8; breakeven point: 223; max profi t: Rs14,000 if the stock expires above 230 levels; max loss: Rs6,000 if the stock expires below 220 levels.
Pair strategy:
Infosys and Wipro: Infosys and Wipro saw correlated movement in the past, with a rolling price correlation of 80% in the six-month data-set. Wipro has outperformed Infosys in the recent past. The current price ratio of Infosys and Wipro is 6.28. The ratio is currently trading around its lows and appears stretched; we believe that it is likely to revert to its mean levels. The mean price ratio is 7.02 and the current price ratio is more than 99 percentile away from the mean ratio. There is a high probability of convergence between the stocks from current levels.
Buy one lot of Infosys May futures @ 2910-2915 and sell one lot of Wipro May futures @ 465-467; current price ratio: 6.28; target: 6.80 and 7.00; SL: 6.00.
