Any dip can be used to deploy a bull-call-ladder options strategy in Nifty: Siddarth Bhamre

However, domestic investors continue to pump money via SIPs, the foreign investors have largely remained sellers. Commodity prices have cooled down and the astronomical bull run in them is left behind, technical analysts said.

Even on Friday, they sold index futures, based on long unwinding and fresh formation of short positions, said Siddarth Bhamre, Research Head, Religare Broking.

“Technically, Nifty has support around 16,800-17,000 zones and support for Nifty Bank lies around 34,500-35,000 zones, ” he added. “Upside seems to be capped for around 17,500-17,600 and 38,000 for Nifty and Nifty Bank respectively.”

Apart from flows, news sentiment plays an important factor in the markets. Though price determines sentiments, it is also measured in terms of the implied volatility of options.

“Our reading of IVs suggests that despite recent corrections, the decline in IV means participants are not expecting any major correction and Nifty’s support zone may remain intact in near future,” Bhamre said.

“The same can’t be said confidently for Nifty Bank as IV has increased to 24 per cent, which was last seen 2,000 points up around 38,000 levels for the index,” he added.

Going forward, some heavyweights to play tug of war to keep index movement in check. Any dip towards 16,800-17,000 can be used to deploy the Bull-Call-Ladder options strategy in Nifty, he suggests.

“On Monday, as global setup and SGX suggests, we may open around 17,000 levels,” he added. “So there will be a dip in premiums due to lower opening and weekend time decay.”

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In the above strategy, there will be a premium outflow of around 50 points. Since there is an outflow, you need to add premium outflow to the lowest strike price to reach breakeven point 1 and subtract premium outflow from the highest strike price to arrive at the break-even point 2.

So in the above strategy, if the difference of premium paid is around 50, then by expiry if Nifty remains between 17,050 and 17,550, then profit would occur, with a maximum profit of 150 points between 17,200 and 17,400.

It’s important to note that maximum risk is unlimited in this strategy above 17,550. Needless to mention, if the market closes above 17,500, then it’s a strong market and this strategy should be closed. On the downside, the risk is limited to 50 Nifty points.