Implement Long Straddle on Nifty50 for November’s Series, Shilpa Rout explains

“For NIFTY, the best possible strategy is LONG STRADDLE at 17800 at monthly expiration. There is an expectation of a strong unilateral move from current levels, and this strategy is reaping good results from such scenarios,” said Shilpa Rout – Derivatives Lead Analyst, Prabhudas Lilladher Pvt Ltd.

In an interview with ETMarkets, Rout said: “17700 is a very crucial level to watch, a break below will be 17200, otherwise 18400 is not very far away” Edited excerpts

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What a week for Indian markets. Nifty has regained 17700 levels, while Sensex also managed to reach 59K. What sparked the price action? The Nifty moved more than 2% from the past week and this move was clearly led by the banking, auto, oil and gas, pharma and metals sectors.

The positive quarterly results of large companies, together with the festive week, led to a further rise in the market.

There was a fairly broad participation from many segments, which means we now have a large support base for the bulls.

Where do you see the markets in November based on the October series data? The Nifty rolls were seen at 76%, which is in line with the average of the past few months, and Banknifty at 77%, which is much lower than the average of the previous series.

The options chain reflects a trading range of 40000-43000 for the Index on a broad basis, with 41500 being a critical level to maintain.

Banknifty monthly expiration series option chain shows 42000 straddle where maximum PE and CE contracts are added more than 30000 each.

For the Nifty50, 16000, 17000 and 17500 are active strike rates where the highest PE writers have built up their positions, providing a downward range if current levels are not held.

On the plus side, the CE writers sum up their positions at 18000, 18500 and 19000 levels of over 40000, 30000 and 20000 contracts each.

For now 17700 is a very crucial level to watch, a break below that on a closing basis will be 17200 otherwise 18400 is not very far off.

Are there any events that traders should watch out for that could dent the bull run? There are many events on the agenda in the first week of the series, such as the FED meeting, potential rate hikes, our domestic events of the RBI meeting and of course the war crisis.

These are a few scenarios that will lead to some turbulence in our market, but the picture remains intact on a positional basis for the upward movement.

A strategy that can be deployed based on the M&D data? For NIFTY, the best possible strategy is LONG STRADDLE at 17800 at monthly expiration. There is an expectation of a strong unilateral move from current levels, and this strategy is reaping good results from such scenarios.

The strategy gives good returns once the sharp move occurs on one side.

You can also play via BULL CALL SPREAD: Buy 17800CE and Sell 18200CE.

(Disclaimer: Recommendations, suggestions, views and opinions of the experts are their own. They do not represent the views of Economic Times)

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