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Don’t know where market will drift on Budget Day? Deploy Modified Put Butterfly Spread

January series ended with a big jump as benchmark Indices scaled to all-time highs. The Nifty gained 5.6 percent while Bank Nifty gained 7.6 percent viz-a-viz last monthly expiry.

Rollover for Nifty stood at 65% compared to 71% last expiry while for Bank Nifty rolls were at average 71 percent. January series marked Nifty PCR OI moving to highest point in last 5 years at 1.89.

Better than expected Q3 earnings by corporates followed by FII inflows of Rs 9,500 crore in the cash market and Pre-budget expectation propelled the momentum significantly.

Option data for February series remains well distributed across strikes for Calls of 11,000 to 11,500 and for Puts from 11,000 to 10,600 with open interest ranging from 20-25 lakh shares each indicating option players remains cautious ahead of Budget with bets placed at both sides.

In Index Options too FII added significantly to their positive bias with Synthetic long /Short ratio {(Call Long +Put Short)/ (Put Long+ Call Short)} placed at 1.29, highest in last 6 months.

Synthetic Long /Short ratio are placed at 0.95 signifying nearly equal position on both sides. Possibility of Volatility based strategies placed before Budget event.

India VIX, an indicator to riskiness did give a breakout from the range of 12-14% towards 18.5 percent to settle the series at 17.51 percent, with gain of 25 percent.

Investment & trading in securities market is always subjected to market risks, past performance is not a guarantee of future performance.
CapitalStars Investment Adviser: SEBI Registration Number: INA000001647

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