Nifty Derivatives Strategy by Chola Securities. Option data indicates bullish activity

Nifty Outlook:

The index has been scaling new highs since the reversal that was witnessed on 27th October. The uptrend is intact; led by FII’s being a constant buyer in the cash segment Additionally; the index futures data has become positive as FII’s have covered all the short contracts from the system. Total number of long contracts now stands at 35,363 vs prev 38,695. On 14th December; 978 long contracts were added compared to the addition of 4,310 short contracts in index futures. The long/short has
recovered from the lows of 12% that was witnessed during the beginning of November series to 57% now; indicating significant covering of shorts. On the index options front, the net call-put is indicating significant unwinding of call writers. To conclude, the data is bullish from FII’s point of view now. Option data is indicating positive activity. Expect the index to trade in a range of 21,100-21,500.

Weekly Expiry Point of View:

Option chain data for next weekly expiry is indicating a trading range of 21,100-21,500 zones. On the call side, 21,000 is the strike with highest OI. Majority of call writing was witnessed at this level; indicating resistance. On the put side, 21,100 is the strike with highest OI. As per the data, net call-put writing is indicating significant unwinding of call writers; which is a bullish indicator. Expect the expiry to be positive with 21,500 as a resistance.

Strategy:

The sentiment on Nifty bullish. However, the strategy can be played out by selling 1 OTM PUT & selling 1 OTM CALL.

Nifty Theta Scalping Strategy:

SELL 1 LOT PUT NIFTY 21DEC2023 21,000 @ 30
SELL 1 LOT CALL NIFTY 21DEC2023 21,600 @ 30
Target – COMBINED PREMIUM OF 30 POINTS
Stop Loss – COMBINED PREMIUM OF 80 POINTS

Download strategy report: Derivatives Update – 15th December 2023