Nifty50 ended Friday, December 29th, on a tepid note, down 47.30 points (0.22%) at 21,731.40
This dip, despite positive global cues, raises questions about the near-term trajectory of the index. To understand the implications and formulate strategies for the 4th Jan expiry, letโs delve into option chain data, FII & DII activity, and consider an option-neutral approach.
Nifty50 Option Chain Insights:
- Support:ย Strong support lies at 21,550, followed by 21,400. Put OI (Open Interest) concentration increases here, indicating buying activity at these levels.
- Resistance:ย Immediate resistance sits at 21,850, followed by 22,000. Call OI is higher around these levels, suggesting potential selling pressure.
Key Data Point
- Nifty Close:ย 21,731.40 (-0.22%)
- Put-Call Ratio (PCR):ย 1.25 (indicating a slightly bearish bias)
- Implied Volatility (IV):ย 18.5% (suggesting potential for market swings)
Nifty50 FII & DII Data:
- FIIs:ย Net sold equities worth Rs. 1,263 crores on Friday, indicating profit booking after the recent rally.
- DIIs:ย Net bought equities worth Rs. 637 crores, providing some counterbalance to FII selling.
Implications:
- Consolidation or further downside:ย The near-term picture could see consolidation between 21,550 and 21,850 before a clear direction emerges. A break below 21,550 could trigger further selling, while a breach of 21,850 could open doors for an upward move.
- Volatility could remain elevated:ย FII activity suggests potential near-term volatility, impacting option premiums.
Additional Insight
- Sectoral Performance:ย IT and Pharma outperformed, while Banks and Metals lagged.
- Global Cues:ย Positive global markets on Friday failed to lift Nifty, indicating potential domestic concerns.
Iron Condor Strategy for Nifty Expiry on 4th Jan
Considering the support and resistance levels identified in the option chain:
- Support:ย 21,550
- Resistance:ย 22,000
Sell:
- 1 Put Option with a strike price of 21400 (OTM Put,ย below support)
- 1 Call Option with a strike price of 22100 (OTM Call,ย above resistance)
Buy:
- 1 Put Option with a strike price of 21200 (further OTM Put)
- 1 Call Option with a strike price of 22250 (further OTM Call)
Payoff Graph:
This graph should showcase the potential profits and losses of the Iron Condor at different Nifty levels on expiry. The maximum profit zone will be between 21500 and 22000, with profits gradually declining as Nifty moves closer to either edge of the range. Beyond the range, losses will start accumulating.
Key Points:
- Maximum Profit:ย Achieved with Nifty expiring anywhere between 21500 and 22000.
- Maximum Loss:ย Limited to the net premium received,ย minus transaction costs.
- Breakeven Points:ย Nifty at 21300 (lower breakeven) and 22150 (upper breakeven).
Remember:
- Iron Condors are complex strategies.ย Thorough understanding and risk management are crucial.
- Market conditions can change rapidly.ย Continuous monitoring and adjustments might be necessary.
- Consult a financial advisor for personalized guidance before implementing this strategy.
By adjusting the strike prices slightly, this revised Iron Condor offers a tighter range but also increases the risk of early assignment. Carefully consider your risk tolerance and market expectations before choosing this strategy.
Financial Disclaimer: This article is for informational purposes only and should not be construed as financial advice. Please consult a qualified financial advisor before making any investment decisions. The author and publisher are not responsible for any losses incurred as a result of using the information provided herein.
