Nifty 50 in Range; Options Selling Still Going Strong!

  • Stock Market Analysis

The frontline Nifty 50 index is clearly in a downtrend and the smooth rally that took it to 19,991.85 isn’t there anymore. However, the market is also taking strong support from the lower level which is making it go nowhere.

The support of 19,200 is a key level to watch out for to initiate fresh short positions. And as the resistance of 19,584 hasn’t been crossed yet, the uptrend hasn’t resumed. So, in a nutshell, the index is doing a time pass in a range of 19,600 - 19,200. As long as this range is intact, it's difficult to make money with a directional view.

In this type of environment, options selling works wonders. Although some of you might argue that India VIX is so low, at around 11.8 which increases the risk in writing options, which is true, however, the current lackluster movement is what exactly is needed while deploying such strategies.

Here’s my preferred strategy for the 7 September 2023 weekly expiry in this type of environment and range. It’s called a Jade Lizard.

Firstly, 19,200 is good support and we’ll keep a margin of 50 points and short sell 19150 PE at the current price of 36.05. Similarly, the call option at the resistance level with a margin of 50 points can also be sold short, which is 19,650 at 18.15. Now, to hedge the upside, 19750 CE can be bought at the CMP of 8.85.

The combined premium that traders will receive is 45.35 or INR 2,267 per lot on a margin of 87,700. This gives us the max profit potential of 2.5% on the capital deployed, in a week.

Below is the risk and return profile

As long as the market expires between 19,150 and 19,650 on 7 September 2023, traders will keep the full profit. The risk starts beyond these ranges which is unlimited on the downside and capped at INR 2,733 per lot on the upside. To maintain a healthy risk profile, here’s the exit rule - If the PE gets tested, that should be exited immediately as and when the market reaches there. If the CE gets tested, both long and short calls should be exited, leaving the put as it is.

Read More on Nifty 50: An Options Strategy in Nifty 50 for Not-So-Bullish Traders!

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  • Varghese Thoppil @Varghese Thoppil
    😀  Thank you for giving us such an excellent info
    Like 2
  • Manjunatha SG @Manjunatha SG
    nifty 50 can go up today?
    Like 2
    buy manappuram 153 stop loss 148.5 target 160 intraday
    Like 0
  • Ram Seshagiri @Ram Seshagiri
    Initiated the set up. thank you bruh
    Like 1
  • Yashvir Dalaya @Yashvir Dalaya
    Zerodha won't allow selling/buying options so far off. What broker allows this?
    Like 0
    • Aayush Khanna @Aayush Khanna
      @Yashvir Dalaya Any broker that's does not hit the exchange's defined limits.
      Like 0
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  • Vijay Dasappa @Vijay Dasappa
    best strategy sir 🙏
    Like 5
  • Vijaybhai Pandya @Vijaybhai Pandya
    Comparing International market, it is a clear downtrend can start from next week's. Monthly candle of most of the international market were become red.
    Like 0
  • vineet sehgal @vineet sehgal
    baad mei bolna bhut hi easy task hai..
    Like 0
  • Nitesh Dahiya @Nitesh Dahiya
    Like 3

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