Hey folks! I hope you are doing good. In today’s article, I’m sharing the weekly analysis for Nifty and BankNifty along with option hedging strategies for the coming week expiry.
In this article, I’m sharing the adjustments too. So read this post till the end to know the option hedging strategies we are creating this week and adjustments you can follow if the market is giving a breakout or breakdown from our range.
Before we go further, I want to share a few points for:
Why you should learn and implement these option hedging strategies for your trading and investing?
Everyone is trading with their own style, system, and techniques. But one thing is common for everyone, that is “Risk Management”. Because risk management is the only holy grail to succeed in this stock market. Why? Let me share something to understand it better.
As you know, we are living in an uncertain world. Any day, anything can happen. And when you are trading in such a highly liquid market that can react heavily even with small news or rumor. It is more important that you should always keep yourself ready for the worst. And to keep yourself ready, you should keep more and more focused on risk management.
The reason is obvious: If you don’t have proper risk management rules, anytime, the market can hit you badly. Now, I hope you have understood the importance of Risk Management. But
2. Why it is important to learn these option hedging strategies to manage your risk?
You can be a trader or an investor having an overnight position; there is always a risk that the market can open with gap-up or gap-down. Your nights can be horrible if you have a naked position with unlimited risk because stop-loss will not work with an overnight position. Here options come in the picture. You can easily hedge your position with the options. And that’s the main purpose to introduce this product called “options”.
You can hedge your entire portfolio with these options. You can hedge your cash positions, your future positions or even you can hedge options too. To understand it better, let me give you an example.
Let’s say you have a portfolio with different stocks and the value is around 10 lakh and you are expecting some downside movement in the coming sessions. You can easily limit your risk by adding some Nifty PUTs to your portfolio. It will not only limit your downside risk but will increase your overall return too.
In the same way, you can hedge your futures and options. Now…
3. What is the main reason I’m trading with Option hedging strategies only?
When I started my trading career, I was trading futures and keeping my positions open overnight. But the main drawback with an overnight position is that we have unlimited risk. Only one bad trade can hit you very badly. It can eat your all yearly profit and capital too. And if a trade is running with a huge loss that you can’t afford that trade will become an emotional trap for you.
You can’t make a proper decision for that particular trade. You will try to hold that trade with the hope that it may reverse and you may close it with some lesser loss but the results you may know already. So if you want to be a successful trader, the first thing you have to learn is: “How to control your emotions?” And you can only control your emotions if you have limited risk.
That’s the main reason I have started these option hedging strategies. These strategies are not only helping to manage my risk but generating my monthly cheque too. When I can make 3-4% monthly with these option hedging strategies why take an unlimited risk to generate the same return? What do you think, M I doing right? Share your thoughts in the comment box.
And if you want to learn and earn with me, can enroll in our Mentorship Program. Click on the below button for more details and offers.
Nifty weekly analysis and Option hedging strategies
If you look at the chart you can clearly see that the Nifty is on a downtrend. We saw a big rally in the last 1.5 years and now it’s time for profit booking. So as per the chart, we are in a sell-on-rise setup.
Based on the Fibonacci retracement tool, 17058 & 16694 are the 50% & 61.8% retracement levels respectively. If you follow this tool you would know that this zone (50% – 61.8%) acts as a reversal zone. So, track these two levels more closely.
RSI is also below 40 and it’s decreasing that too indicates that we are in a sell-on-rise trend.
On the downside, a breakdown from 61.8% will completely change the medium-term trend to downward.
On the upper side, 17900 is acting as a resistance zone and a breakout will change its short to medium-term trend to bullish again. So we should follow the Sell-on-rise strategy till Nifty is trading below 17900.
Nifty support and resistance are 16700 & 17900 respectively.
One thing you should keep in mind is that IV is high so a limited risk strategy is only advisable. Let us look at the OI data to know the range based on Open Interest.
Nifty weekly option chain analysis
Based on option chain data available at the time of writing this post, the highest Open interest stands at 17500 CE & 17000 PE, followed by 17400 CE & 17100 PE. PCR of all strikes is 0.54, which indicates an oversold market. PCR at 17000 stands at 7.93, which is acting as an immediate support level.
The Put-call ratio at 17500 stands at 0.19, which is acting as a resistance level. Equally, important indicator Option Pain is at 17300, indicating weekly expiry at 17300. A shift in option pain will provide further levels of expiry. So keep tracking max pain.
Significant open interest buildup on the call side. Indicating good resistance from higher levels. So based on the OI, the possible range for this week should be 17000 – 17500.
Keep tracking change in open interest to analyze market participants behavior, so that you can adjust your position accordingly. If you don’t know how to do weekly analysis to find the best Weekly nifty and bank nifty weekly options strategies. Just enroll for our Option Strategies – A Mentorship Program.
Nifty Weekly options Strategies: Iron Condor
Possible adjustments for Nifty options strategies:
Initially, you can keep a stop loss of 17000 & 17500 for this strategy. Means square off if you find nifty is giving a breakout or breakdown. Or you can do this adjustment too. ( Do not hold this strategy if the loss is more than 3000₹).
If you find that Nifty is giving a breakdown and sustaining below 17000, then square off call spread and bring it down to 400 points lower levels. and make it an iron condor.
The same thing you can do with put spread means if you got a breakout from 17500. You can shift your put spread to 400 points up.
If you want to learn how to do weekly analysis to find the Weekly nifty option hedging strategies with adjustments in more practical ways with live mentorship, You must enroll in our Option Strategies – A Mentorship Program.
BankNifty weekly analysis and Option heading strategies
After a new all-time high, we saw a sharp decline in bank nifty. In this sharp decline, Banknifty hasn’t faced any support from downside levels till now.
If you look at the Fibonacci retracement tool, you will find that 36100 & 34770 are the 50% and 61.8% retracement levels. This zone will act as a reversal zone.
Previously this zone acted as a strong resistance zone and now it turned into a support zone after the successful breakout from this zone. You must follow this zone more closely for further levels.
Because Banknifty is already trading near to its support zone. So any fresh sell trade is not advisable here. You should wait for any sustainable recovery for a fresh long trade or a breakdown from 34700 for a fresh short trade.
On the Upperside, 39100 is acting as the new resistance level and a sustainable recovery is expected only after a successful breakout from this level.
The overall trend is bearish and there is no sign of recovery, so do not initiate a counter trade. Wait for a fresh opportunity and keep your positions with a proper hedge.
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Weekly Bank Nifty options chain analysis for option hedging strategies
Based on Bank nifty option chain data, the highest Open interest stands at 37000 CE & 36000 PE, followed by 37500 CE & 35000 PE. PCR of all strikes is 0.56, which indicates an oversold zone. PCR at 36000 stands at 7.34, which is acting as an immediate support level.
The Put-call ratio at 37000 stands at 0.31, which is acting as a resistance level. Equally, important indicator Option Pain is at 36600, indicating weekly expiry at 36600. A shift in option pain will provide further levels.
If you don’t know how to do the weekly analysis to find your bank nifty weekly option hedging strategies, Just enroll for our Option Strategies – A Mentorship Program.
BankNifty weekly options Strategies
Possible adjustments for Bank nifty weekly options strategies:
Possible adjustments for this weekly Bank Nifty option Strategies are:
- Follow a stop-loss if the max loss is above 2500₹, close this strategy.
- If you find that Bank Nifty gives a breakdown and sustaining below 35500, then shift your Call spread to 1000 points down. The same thing you can do with put spread means if you got a breakout from 37400. You can shift your put spread to 1000 points up.
If you want to learn these bank nifty option strategies with adjustments in more practical ways with live mentorship, You can enroll in our Option Strategies – A Mentorship Program.
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Post your comments in the comment box if you have a query related to the weekly analysis and Best Nifty and Bank Nifty options Strategies. You can ask any question related to option trading in the comment box.
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*( Please avoid any questions 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 or the weekly analysis with nifty and bank nifty options trading strategies 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.