Handy Bank: Nifty and Nifty Bank November Series Option Trading Strategy

The stock market has witnessed an astonishing rally in the past series, which made the festivities more lively for the bulls.

Seen handy rollovers at 76% in this streak, in line with the previous month, but below the 3 month average, and according to the options chain analysis, the monthly expiring PE writers are active at 17000CE – a total of 60 thousand contracts, followed by 17500PE – highest fresh additions of 8 thousand contracts seen. CE writers find their way to 18000CE/19000/19500 strikes – more than 30 thousand contracts in total each, with maximum new exposure also at 19500CE.

At weekly expiration, PE writers actively added their exposure of over a lakh contracts at 17700PE, with CE writers exposure again over a lakh at 17800/18000/18200CE levels. PCR OI at 17700 which is now much higher than 1, is a very positive sign for the bulls.

So the data points to the range between 17600-18300 for the series.

Option Strategy for Nifty Monthly Expiration:

1. Long straddle at 17800.

Straddle strategy involves buying CE and PE with the same staking and with the same expiration date.

2. Bull Call Spread: Buy 17800CE and Sell 18200CE.

Nifty Bank After attempting a rally to all-time highs, Nifty Bank is trying to maintain momentum for the bulls. The rolls are at 77%, which is below the average of the last 3 months and the options chain with monthly expiration reflects the fact that PE writers are active with 40000/41000 strikes – a total of 16 thousand and 14 thousand contracts respectively . CE writers added strong exposures at 42,000, followed by 43,000 strikes. The weekly basis reflects on PE writers building positions at 41000 strikes – over 70 thousand contracts in total, with CE writers adding exposure at 41500 strikes – more than a lakh contracts, followed by 42000/43500 strikes – total additions of more than 80 thousand contracts each, reflecting the immediate support in 41000 zones for the Index, with expanded targets of 43300.

So the data indicates that the flip side is well capped at 40,000 zones and upside targets first placed at 41,500 and a food supply there could soon lead to 43,000 zones.

Nifty Bank Monthly Expiration Option Strategy:

1. Short strangulation: sales 39500PE and sales 43000CE.

Note: Selling options is a very complex scenario with a high risk and profit.

Sectors likely to outperform in this series include banking, financials, pharmaceuticals, real estate, oil and gas, autos and metals, while technology lurks.

Long choices:

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Short choices:

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(The author is Derivatives Lead Analyst, Prabhudas Lilladher)

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