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What Options data indicates – 5150 key level to watch out

, March 20, 2012, 0 Comments

In a choppy session Index(NIFTY) managed to hold some gains and closed with a net gain of 18 points to 5297. Even though it fails to move above key resistance level of 5350-5370.

Open Interest movement
Highest open interest build up is witnessed at 5200 Put with 10.30 lakh shares got added to open interest indicative psychological support around 5180-5200 levels. Traders can speculate against a level of 5170 from where last time it managed to turn back. Any close below 5170-5150 would attract fresh short coupled with long unwinding. We are seven working days away from this months expiry and Nifty premium for the month of April which hovers around 40 points needs monitoring.

We believe that market will continue to consolidate around 5300 levels and as we approach expiry, direction will be more visible followed by corporate results. Key level to watch out is 5150 on down side and 5370 on upside in coming days.

Suggested Approach

If Nifty corrects to 5150-5170 levels one would execute a combination trade of April Call 5300:5600 – 1:2 i.e. Buy One lot of April 5300 call and Sell two lot of 5600 Call. Approximately it will result in to net premium outflow of Rs. 2000-2100. We maintain bullish stand and assume that 5150 levels will be withheld on Nifty.

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Disclaimer : This article is not a suggestion or advice to trade. Any Investor or Trader who desire to take position should posses basic knowledge of Derivative market, Options terminology, Initial cash inflow/outflow and settlement upon expiry, Pay offs, risk and reward involved in Derivative market and Options market. We strongly recommend readers to consult their broker before assuming any positions

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Options Analytics team comprises of people from the field of Analytics and Statistics, Independent Option traders, Technical Analyst, Financial Modelling Specialist and Quants. ...more