Options strategy: Nifty – Likely to get stuck in range trade

Pee Vee
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Options strategy: Nifty – Likely to get stuck in range trade

Postby Pee Vee » Fri Mar 17, 2017 9:49 am

Nifty short straddle (March expiry)

Nifty has given stellar return in last three months by rising almost 16% to all time high levels. The current rally has caught short traders on the wrong foot as market has marched ahead on back of a) Domestic election outcome and b) hawkish FED Policy. Current cool off in IVs and option build-up suggest a range bound trade; wherein delta neutral strategy with short vega/theta remains favorable. Nifty OI distribution indicates max optionality at 9000 strike (in value terms). Thereby, we expect next 10 trading session to remain range bound. BEP for the strategy is at 9005 on downside and 9295 on upside. However, the strategy holds unlimited risk profile and should be traded with strict stop loss of Rs200 on spread.

Trade idea: (2 leg strategy) March series 30th exp. - Sell strike 9,150 call @ 86 and Sell 9,150 puts @ 59.

Current inflow on spread is 145 points, stop loss on spread: 200. Target on spread: 80/40.

Options strategy: Bank Nifty – Pain point for March expiry at 21,000

Bank Nifty short straddles (Weekly option expiry)

Bank Nifty uptrend continues after breaking its previous triple top at 20400 levels. As markets have digested big events of a) FED policy outcome and b) Domestic election verdict, Bank Nifty is likely to consolidate with no major events lined up. Thereby, delta neutral strategies with short vega/theta remains favorable in such conditions. Bank Nifty open interest distribution indicates maximum optionality at 21000 strike (in value terms) on monthly expiry. We expect in next 5 trading session BankNifty to remain range bound. BEP for the strategy is at 20890 on downside and 21510 on upside. The strategy holds unlimited risk profile and should be traded with strict stop loss of Rs810 on spread.

Trade idea: (4 leg strategy) March series 23rd exp. - Sell strike 21100 & 21300 calls @ 261/143 and Sell 21100 & 21300 puts @ 72/149.

Current inflow on spread is 625 points, stop loss on spread: 810. Target on spread: 400/320.

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