In this highly volatile market where the market is trading based on sentiments, it’s important to trade with proper risk management. In my Nifty and banknifty weekly options strategy post, I always give importance to Risk Management and sharing what I have learnt so far.
Successful trading is all about risk management. If you can manage your risk well, you can generate a decent return here. How much you are making in a particular trade is not important. Important is how much you will lose if the script goes against your prediction.
So before entre any trade, always calculate your risk. Follow a system that can help to limited your risk. Like. if I want to take a positional trade and wants to keep my risk on the limited side, let’s say 5000₹ per trade.
To manage that risk I will follow stop loss, but the main drawback with this stop loss is, it will not work for overnight position. A small Gap-UP or Gap-down will hit me badly. Then what is the logic behind that stop-loss which is not working?
Here Option strategies are helping a lot to keep your risk on the limited side. I don’t need to both about any gap-up or gap-down. I can fix my risk for every trade. Like if my strategy has a max loss of 5000₹ means I will not lose more than 5000₹ even if tomorrow there is Gap-up or Gap-down with 20%. Sounds good?
This is the main reason I started with Options Strategies. Because when your account size is big, a small % of extra loss can hit you badly. In other words, Capital protection should be our first priority.
In this article, I’m trying to analyze Nifty and banknifty based on technical and Option chain data and sharing one strategy in each. So let’s start with Nifty.
Nifty Weekly analysis with Options strategy
Before going further let us look at the nifty chart. In my last nifty and banknifty weekly options strategy post I shared that 11512–11320 will act as a reversal zone. but the fall we saw in the last few days in nifty indicates that there is no valid support right now.
This is globally sell-off due to coronavirus and our market is reacting too. This movement is totally based on sentiments and when we got a movement based on sentiments, no data or any analysis will work in such case.
So the best option is let’s keep your positions with proper hedge and let the market settle down first. At this position, any decision based on sentiments can be dangerous. Better focus on how to protect your capital in this type of highly volatile market.
Nowadays IV is very high which is good for some credit spreads but only for delta-neutral strategies. If you want to keep yourself calm, the best option is to keep your delta neutral and try to take benefits of high IV and time decay.
Today, I will not tell you what to do, but I will tell you what not to do in this type of highly volatile market?
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Nifty weekly Options Chain analysis
Based on option chain data, the highest Open interest stands at 11600 CE & 11000 PE, followed by 12000 CE & 10500 PE. PCR of all strikes is 0.61, which indicates a slightly oversold market. PCR at 11000 stands at 10+, which is acting as an immediate support level.
The Put-call ratio at 11500 stands at 0.40, which is acting as a resistance level. Equally, important indicator Option Pain is at 11500, indicating weekly expiry at 11500. A shift in option pain will provide further levels of expiry. So keep tracking Max pain.
Significant open interest buildup on the call side, Especially 11300 CE, 11400 CE and 11500 CE which indicates that the market is facing some resistance from high levels. Based on Option chain data, 11000, 11500 are good support levels and 11500 & 12000 are good resistance levels for this expiry.
Keep tracking open interest to analyze market participant’s behavior. If you don’t know how to analyze open interest for weekly option hedging strategies. Just enrol for our Option Strategies — A Mentorship Program.
Nifty weekly Options Strategy: Iron Condor
Initially, you can keep a stop loss of 10900 & 11500 for this strategy. Means square off if you find nifty is giving a breakout or breakdown. Or you can do this adjustment too.
If you find that Nifty is giving a breakdown and sustaining below 10950 then square off 11500 CE & 11600 CE in profit, and short 11200 CE and buy 11300 CE.
The same thing you can do with put spread means if you got a breakout from 11500. You can shift your put spread to 300 points up.
If you want to learn these strategies and their adjustments in more practical ways with live mentorship, You can enrol in our Option Strategies — A Mentorship Program.
BankNifty Weekly Analysis with option strategies
Based on the Fibonacci retracement tool, Banknifty is trading between reversal zone (50%-61.8% levels) i.e. 29575–28850. A breakdown from 28850 will drag Banknifty into a deep negative zone.
Right now, I prefer not to entre any long or short trade in banknifty. Let it settle down first. Then only we can drive some accurate levels.
Right now the movement is Banknifty is based on sentiments and in such type of movement, no data or analysis will work, so better protect your capital for the coming opportunities you will get.
Trust me guys sometimes sitting without any trade is the best trading setup. Protect your capital and trade with limited risk strategies only.
BankNifty Weekly options chain analysis
Based on option chain data, the highest Open interest stands at 30500 CE & 29000 PE, followed by 30000 CE & 28500 PE. PCR of all strikes is 0.57, which indicates a slightly oversold zone. PCR at 29000 stands at 8.06, which is acting as an immediate support level.
The Put-call ratio at 30000 stands at 0.33, which is acting as a resistance level. Equally, important indicator Option Pain is at 28500, indicating weekly expiry at 28500. A shift in option pain will provide further levels.
If you don’t know how to analyze open interest. Just enrol for our Option Strategies — A Mentorship Program.
BankNifty Weekly Options Strategy: Iron Condor
If you find that BankNifty gives a breakdown and sustaining below 28850, then Shift your Call spread to 400 points down.
The same thing you can do with put spread means if you got a breakout from 29900. You can shift your put spread to 400 points up.
If you want to learn these Weekly expiry option strategies and their adjustments in more practical ways with live mentorship, You can enrol in our Option Strategies — A Mentorship Program.
Much Check this also– Performance of the Option strategies, Nifty & BankNifty Weekly Analysis with Option strategy, Nifty Option Strategy for Budget Session, A low-risk options strategy in LICHSGFIN, An iron condor options strategy in ICICIBANK, Reverse Jade Lizard options strategy in UPL, A high probability options strategy in YESBANK
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*( Please avoid any question like which Call or Put we should buy in the coming week).
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DISCLAIMER: — we are not a SEBI research analyst. Views posted here only for educational purposes. There is no liability whatsoever for any loss arising from the use of this product or its contents. This product is not a recommendation to buy or sell, but rather a guideline to interpreting specified analysis methods. This information should only be used by investors and traders who are aware of the risk inherent in securities trading.