F&O Strategy Today: Global Cues Positive; Gift Nifty Higher | Futures & Options Trade

Summary

The video discusses the Indian stock market, focusing on the Nifty's consolidation around 23,300 and the impact of weekly options expiry. It outlines an options strategy involving buying and selling puts for different expiry dates to capitalize on expected market movements. The discussion includes potential adjustments and risk-reward analysis, with a specific focus on Dixon Technologies as a stock to watch, suggesting a bull call spread strategy if the price crosses 10,400.

Takeaways

• 📈 The Nifty is consolidating around the 23,300 mark with little change in open interest for Futures.
• 📉 Bank Nifty saw a 5% unwinding in open interest, possibly due to the weekly options expiry.
• 📊 There was a 4% advance in Bank Nifty, but the overall market movement was mixed with more gainers than losers.
• 🏦 Stocks like Sun TV, Uja Cement, and Crompton had long positions, while Pedite and Interlobe Aviation had short positions.
• 📌 The 23,000 put has seen substantial accumulation, which could act as a base for today's trade.
• 🔢 There is substantial writing around the 23,400 and 23,500 calls, indicating potential resistance levels.
• 📉 A small downtick in the market is expected in the second half of June and July, but not breaching 22,500 on the downside.
• 📝 The suggested option strategy involves buying the 23300 put of July series and selling two puts of 23,000 and 22,000 of 4th July to offset the premium.
• 🔄 Adjustments to the option strategy would involve rolling over the 4th July puts to subsequent weeks if Nifty stays above 23300.
• 💡 The risk for the option strategy is considered low with a stop loss at 22,200, expecting a reward that is double the risk.
• 🔍 Dixon Technologies is on the radar for a potential bull call spread strategy if the price crosses 10,400.

Q & A

What is the current status of the Nifty index as per the script?

The Nifty index is currently in a state of consolidation, trading around the 23,300 mark.

What happened to the open interest in the bank Nifty futures on the day of the script recording?

There was an unwinding of nearly 5% in the bank Nifty futures open interest.

How did the bank Nifty perform on the day of the script recording?

The bank Nifty saw an advance of about 4% on that day.

What is the significance of the 23,000 put in the script's context?

The 23,000 put has seen substantial accumulation and could potentially serve as a base for the day's trade.

What resistance levels are mentioned for the Nifty index in the script?

There is substantial writing around the 23,400 and 23,500 levels, which could provide resistance on the higher end.

What was the overall market trend in terms of gainers and losers on the day discussed in the script?

There were more gainers than losers, indicating a mixed market trend.

What is the recommended option strategy by Rul for the Nifty index according to the script?

Rul suggests buying the 23300 put option of the July series and selling two put options of the 4th July expiry at 23,000 and 22,000 to offset the premium.

What is the approximate premium for the option strategy discussed by Rul?

The premium for the bought put option is around 320-330 rupees, and the inflow from selling two put options is about 180 rupees.

What is the adjustment strategy for the option structure if Nifty stays above 23300?

If Nifty stays above 23300, the 4th July sold puts would be bought back, and new puts for the 11th and 18th of July would be sold in a rolling fashion.

What is the risk-reward ratio for the discussed option strategy?

The risk is between 1,500 and 2,500 rupees per lot, with an average reward expectation of around 3,000 rupees, making it an acceptable double of the risk.

What stock is mentioned in the script for a potential bullish options strategy?

Dixon Technologies is mentioned, with a strategy to buy the 10,500 call and sell the 10,600 call of the June end expiry once the price crosses 10,400.

Outlines

00:00

📈 Market Analysis and Option Strategy

The video script begins with a discussion on the current state of the Indian market, focusing on the Nifty index and its trading patterns around the 23,300 mark. The script notes the consolidation of the market and the limited movement in open interest for futures, particularly in the banking sector. It also touches on the impact of weekly options expiry and the potential for market movement based on put and call options. The speaker suggests an option strategy involving buying and selling put options of different strikes and expiries to capitalize on market consolidation with a low risk and potential for profit. The strategy includes specific instructions on adjustments if the Nifty remains above a certain level, and the potential for profit or loss is also discussed.

05:03

📊 Adjustments and Stock Recommendations

The second paragraph delves into the specifics of when and how to adjust the previously mentioned option strategy. It outlines the conditions under which the 4th July put options would be rolled over to subsequent weeks, emphasizing patience and the long-term nature of the trade. The speaker also discusses the risk and reward associated with the strategy, providing a stop-loss level and estimating potential gains and losses. Additionally, the paragraph includes a stock recommendation for Dixon Technologies, suggesting a bull call spread strategy based on certain price movements, highlighting its potential as a momentum stock and its attention from traders.

Keywords

💡Futures and Options

Futures and options are financial derivatives used for hedging against or speculating on the future price of an underlying asset. In the context of the video, they are the main focus of the market analysis, with the script discussing how these instruments are trading and their implications for the market's direction.

💡Nifty

The Nifty is a stock market index for the National Stock Exchange of India, representing a basket of 50 of the largest and most liquid Indian companies listed on the exchange. The script mentions the Nifty trading around the 23,300 mark, indicating the index's performance level and its relevance to the market's overall health.

💡Open Interest

Open interest refers to the total number of outstanding contracts that have not been settled. In the script, it is mentioned that there was very little change in open interest for futures, indicating a lack of new positions being taken, which can be a sign of market sentiment.

💡Bank Nifty

Bank Nifty is a benchmark index representing the banking sector of the Indian stock market. The script discusses a 4% advance for the Bank Nifty, suggesting a positive movement in the banking sector's stocks, which is an important segment of the overall market.

💡Weekly Options Expiry

Weekly options expiry refers to the date when weekly options contracts become invalid if not exercised. The script notes that the previous day was the weekly options expiry, which can influence trading volumes and market volatility, as seen with the unwinding of positions.

💡Accumulation

In trading, accumulation refers to the increase in the number of contracts or shares held by investors, often indicating a belief in a future price increase. The script mentions substantial accumulation at the 23,000 put, suggesting that many investors are betting on a potential decline in the Nifty index.

💡Resistance

Resistance in technical analysis is a price level that an asset has difficulty surpassing, as it is seen as a barrier to the price's advance. The script discusses resistance around the 23,400 and 23,500 levels for the Nifty, indicating potential obstacles to further price increases.

💡Call Options

A call option is a contract that gives the holder the right, but not the obligation, to buy an asset at a specified price within a certain time frame. The script suggests that if the Nifty shows strength and sustains above 23,400-23,500, many call options could be covered, implying a potential increase in the index's price.

💡Longs and Shorts

In trading, 'longs' refer to investors who have bought a security expecting its price to rise, while 'shorts' are those who have sold a security expecting its price to fall. The script mentions longs in Sun TV and shorts in InterGlobe Aviation, indicating the directional bets taken by investors on these stocks.

💡Unwinding

Unwinding refers to closing out a position in a security, often to realize profits or losses. The script discusses unwinding of short positions in certain stocks, which can affect the stock's price as the pressure from short sellers is reduced.

💡Bull Call Spread

A bull call spread is an options strategy that involves buying a call option and selling another call option of the same asset with a higher strike price and expiration date. The script suggests using this strategy with Dixon Technologies, indicating a bullish outlook on the stock's price movement.

💡Stop-Loss

A stop-loss is an order placed with a broker to sell a security when it reaches a certain price, aiming to limit an investor's loss on a position. The script mentions keeping a stop loss at 22,200 for the Nifty, which is a risk management strategy to protect against significant losses if the market moves against the investor's expectations.

Highlights

Consolidation continues in the Nifty, trading around the 23,300 mark.

Little change in open interest for Futures; bank Nifty shows a 5% unwinding.

Bank Nifty advances by 4% despite weekly options expiry.

Today is Nifty weekly options expiry with mixed cues on overall open interest change.

Approximately 500 Point OD range observed with substantial accumulation at 23,000 put.

Resistance seen around 23,400 and 23,500 with substantial amount of writing.

Calls might be covered if Nifty sustains above 23,400-23,500.

Stocks show a mix of trade with more gainers than losers.

Longs in Sun TV, Uja Cement, and shorts for Pedite and Interlobe Aviation.

Unwinding of short covering for Container Corp and unwinding of longs for GMR Airports.

Benchmarks are consolidating post last week's big event.

Rul Goch of Hedg Talk joins the show to discuss the current trading on benchmarks.

Upside limited at 23,400 with a small downtick expected in the second half of June and July.

Option structure strategy involving buying 23,300 put of July series and selling two puts for offset.

Premium inflow and outflow details for the option structure.

Adjustment strategy for the option structure if Nifty stays above 23,300.

Risk and reward analysis for the option structure.

Dixon Technologies on the radar for a bullish options strategy.

Transcripts

[Music]

welcome this is India market open we are

taking stock of the Futures and option

space and how things have FedEd there

well consolidation continues at least as

far as the nift is concerned continuing

to trade around the 23,300 Mark

yesterday was a day of trade where we

didn't see too much a qu% up move for

The Benchmark and well when it comes to

the open interest very little change as

far as Futures are concern the bank

Nifty we actually saw unwinding to the

tune of nearly 5% but remember yesterday

was also the weekly options expiry

perhaps to a certain extent this had

something to do with it but we saw about

4% advance for the bank Nifty as well

yesterday now today is the Nifty weekly

options expiry and while we had mixed

cues coming in as far as your you know

overall change in oi is concerned

yesterday moving into today we're still

keeping an eye on our roughly 500 Point

OD range while well 23,000 put is where

we've seen a substantial amount of

accumulation and that potentially could

serve as a little bit of a base in

today's year of trade on the higher end

of course we do have substantial amount

of writing around the

23,400 and 23,500 GS and that would

potentially provide with you some amount

of resistance on the higher end not

completely ruling out a very sharp up

move but well should we in fact see more

strength on the Nifty today and perhaps

if it does sustain about 23400 23500 you

never know we could see a lot of these

calls being covered um but let's move on

and talk about stocks then and yesterday

again it was a mixture of trade even

though we had more gains than losers uh

more gainers than losers pardon me and

of course uh we did see Longs in Sun TV

uja cement Crompton shorts for pedite as

well as interlobe Aviation and among

stocks with so unwinding about of short

covering for container cop but ruini as

well as ABB India and on the other hand

we saw a little bit of Longs unwinding

for gmr airport so these are some of the

cues that we're keeping an eye on but

now that we have the big event out the

way last week now that the dust has

settled we're looking at a lot of these

benchmarks consolidating at the moment

the question really is what do you do

with them now going forward well we have

rul goch of hedg talk in who's joining

us on the show rul Good morning thanks

so much for joining in what's your

reading now and what's the way forward

when it comes to the

benchmarks good morning and thank you

for having me so the current trading on

the benchmarks is that the upside is

very limited at 23400 or thereabouts

where we are we don't see more than

about 3 350 points on the upside but if

you take the second half of June and the

July series we expect that markets might

consolidate and have a small downtick as

well and when I say small downtick we

don't expect anything major we don't

expect 22500 to get breached on the

downside but yes a small downt take of

profit booking is generally what is on

the cards and is

expected all right so based on that what

kind of an option structure are you

deploying

rul so uh exactly keeping this view in

mind uh we've come up with an option

structure where what we doing is we are

buying the 23300 foot but of July series

because we want some time in hand even

though there's about 15 days in June

that's not enough so we need some more

time in hand so 23300 put option of July

it's fairly liquid we go ahead and buy

that uh this gives us room for the trade

to play out the premium with today's Gap

up should be approximately around 320

odd levels to offset this premium we

using the 4th July expiries so the first

is 23300 of end July and to offset this

we're selling 23,000 of 4th July and 23

22,000 P of 4th July once again so I'll

repeat two puts we are selling for one

put bought the Two Sold puts are 23,000

4th July expiry and 22,000 4th July

expiry a combination of these will give

you a premium of approximately 180 odd

rupees so the outflow is about 320 330

and the inflow is about 180 but mind you

because it's the 4th July expiry we can

gain back some more premium by selling

the rest of the 3 weeks of July expiries

to make the trade as close to break even

in case markets do not move on the

downside in June and July so little

patient trade but very high probability

why because in case markets don't move

down you barely lose any money because

you keep buying back the bought premium

with the sold puts and in case Market

remains sideways or goes down you tend

to profit uh on the downside all right R

so then let's talk about adjustments now

firstly if you could tell tell us the

Horizon uh for this specific option

structure uh also moving on if we do

need to roll over the 4th July puts onto

the next onto the subsequent week under

what circumstances would you do

that so the only time we would roll over

the 4th July puts is if Nifty stays

above 23300 which is our anchor strike

and uh We've we've come to the end of

June or we've come to the 4th of July

till then it's just a patient game the

trade uh needs to be open till July it's

not a trade for the month of June so how

the adjustment would work is we would

buy back the 4th July sold puts which

would essentially expire worthless

because markets did not move down the

trade went against our view and we would

sell 11th July expiry on 11th July we

would buy back the 11th July puts and

sell 18th July puts and so on and so

forth every time we do this we get back

some amount of credit what that

essentially means is our risk keeps

coming down with every passing week so

even even though the holding period is

slightly longer the risk is very

negligible owing to majority of the

premium being made back by us by the

sold

puts and if you could tell us about the

consideration in terms of risk and

reward per lot

here the risk is fairly low what we've

done is we've kept a stop loss at

22200 uh we don't expect the markets to

go to 22200 if you remember I mentioned

22500 is where we expect the markets to

uh correct to if there isn't if there is

a correction

at 22200 you can take a stop- loss and

exit the entire position depending upon

the time of the month we expect the

risks to be about 100 to 150 points in

Nifty which would be about 1,500 rupees

a lot approximately for uh I beg your

pardon between 15500 and 2500 rupees a

lot which is about 70 to 100 points and

in terms of reward once again depends on

the time of month you are if uh you're

very close to 4th July your reward can

be as high as uh uh 4,000 to 5,000

rupees but an average reward to expect

should be around rupees 3,000 which is

double of our risk which is acceptable

all right all right so that's as far as

benchmarks is concerned any stocks on

your radar at the

moment yeah also wanted to uh inform

viewers that the strategy last week

which is on the bullish side once again

paid off really well once again uh on

the stocks front Dixon Technologies is

something that uh we continue to keep

our eye on on on the equity side and on

the options side so Dixon Technologies

what one can do is uh above 10,400 in

spot it's currently around 10,330 if my

memory serves me right we can buy the

10,500 call of June end expiry and sell

the 10,600 call of June end expiry this

would be a simple bull call spread with

10,500 and 10,600 with the caveat that

we enter this once prices cross 10,400

on the upside absolutely uh

straightforward strategy there and Dixon

Technologies on the radar of several uh

well traders who actually deal in

momentum cross-section momentum

specifically and of course the Dixon

Technologies is now starting to pop up

in some of those scanners so we'll

Contin to keep an eye on that one but

rul on that note taking a moment to

thank you for joining us and taking us

through your views on the markets

helping us how to employ and and use

options in such circumstances and also

giving us that call on Dixon

Technologies with that it's back to you