Sale 25 Jan 18050 Call 93; Sell Jan 25, 18050 Set at 89; Target: 10; Stop Loss: 280 (1 lot each)
reason:
The convenient recovered slightly last week and despite Friday’s weakness, it closed the week in the green. The resumption of FII capital into the market has helped Nifty outperform the global indexes. However, Nifty’s outstanding performance can be attributed to the technology and
twins, while the broader markets have underperformed. Going forward, we expect Nifty to recover towards 18400/500 with support near CMP, considering January Put and VWAP bases.
From a data perspective, during the recent recovery, Nifty saw a close between short positions as FII closed their short positions last week. Furthermore, the popular high Nifty premium has dropped significantly in the last few sessions and is close to 20 points off the monthly payment. However, aggressive call writing continues to occur at ATM and OTM strikes, which can act as an immediate obstacle. However, the acceleration can be seen if Nifty can move above 18,200 levels.
Tech heavyweights provided much-needed support to the market amid better-than-expected quarterly results in select infrastructure stocks. We think the positive trend in these stocks will continue to support the market.
The volatility index hasn’t rallied much and remains below 15 suggesting limited downside expectations. However, an ongoing breakout of the 17800 and 18200 ranges could trigger an increase in volatility until then, non-directional strategies can be applied.
Therefore, since we are holding our consolidation view, we recommend traders to use the short standing options strategy. It is a 2-way options strategy and involves selling Call and Put options at an ATM. However, one needs to be careful on both sides as the strategy will start to lose if Nifty moves above 18250 or moves below 17850.
Traders will get the maximum profit if Nifty expires near 18000 on the expiry date of January 25th.
(Raj Deepak Singh is an F&O analyst at ICICIdirect)
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