Nowadays the market is highly volatile. The major reason is this Covid-19 pandemic. In this highly volatile market, When the market is totally unpredictable, what should be our strategy to trade? Today in our weekly options strategies post, we will discuss, how can we deal with this highly volatile market?
When the market is unpredictable, first this we should focus on is, “how to limit your risk?”. Because when we can’t predict the trend, we don’t know where the market will be tomorrow or in the coming week.
In this type of market, when the market is going both the direction like the day before yesterday it was open Gap-down by 3%, yesterday it opened 2% Gap-up and now today, it’s again 4% gap-down (we are assuming this movement). In this type of unpredictable market, If you are trading with directional strategies, chances are high that you will trap in a zig-zag movement.
Despite this zig-zag movement, one thing we can observe is, that still market is trading in a range. Still, it is respecting both, the support and the resistance. So what should be our weekly options strategies in this type of market?
I suggest, if you can’t predict the market, better we should trade with limited risk range-bound strategies. There are 2 major reasons to trade with these limited risk range-bound weekly options strategies are:
- You don’t need to predict the trend or direction of this market. Just find the range based on support and resistance on charts and confirm it with the Open interest data.
- The second reason is: When IV is high, that means the option premiums are also high. High premium gives you a chance to sell options and collect more premiums. But if you can’t sell options naked at this time because risk will be very high with naked options. So best weekly options strategies are credit spreads like an iron condor, butterfly, iron butterfly etc.
One more big reason to trade with non-directional limited risk strategies is: Because your risk is limited on both sides. That means you already know how much max you can lose in that particular strategy. Now it will be very easy for you to manage that trade, You can do the proper adjustments if the script is moving beyond your calculated range,
You can easily bring your risk to breakevens because you are not loosing unlimited and you need to collect a small premium to convert this strategy into a no loss strategy. (no loss strategy means you are closing a strategy at breakeven or with a nominal loss.)
If you don’t know how to deploy these strategies? how to calculate that range with the help of option chain data? How to do the proper adjustments? or How to manage a strategy in the live market?
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Nifty analysis with weekly options strategies
After a decline, we saw that Nifty is trying to take support from 14500. Now 14500 – 14200 is acting as a strong support zone and I believe it should respect that level.
Now as we know that Nifty started taking support from 14500 – 14200, What next?
If you look at the chart, You will find that 15000 is the resistance here. The same I have shared in my last weekly analysis & options strategies post. Nifty took resistance at 15000 and traded in the range of 14500 – 15000 this entire week.
A breakout is required to generate a buy signal again. After a breakout from 15000, we may see an upside movement till 15500 and a breakout from 15500 will open new opportunities for long holders.
For the coming weeks until nifty is not giving a breakout from 15500 and breakdown from 14000, You may trade with range-bound strategies.
If you don’t know how to find the opportunities in this highly valatilty, come and enroll to our Mentorship Program where I’m sharing my strategies that I’m deploying in my own account with proper and timely adjustments alerts.
Nifty weekly Options Chain analysis
Based on option chain data, the highest Open interest stands at 15000 CE & 14700 PE, followed by 14800 CE & 14500 PE. PCR of all strikes is 0.75, which indicates a neutral market. PCR at 14500 stands at 6.80, which is acting as an immediate support level.
The Put-call ratio at 15000 stands at 0.07, which is acting as a resistance level. Equally, important indicator Option Pain is at 14700, indicating weekly expiry at 14700. A shift in option pain will provide further levels of expiry. So keep tracking max pain.
Significant open interest buildup on both the side, which indicates that the market is facing support from both the side.
Keep tracking open interest to analyze market participant’s behaviour. If you don’t know how to analyze open interest for weekly options strategies. Just enroll for our Option Strategies – A Mentorship Program.
Nifty weekly Options Strategy: Iron Condor
Initially, you can keep a stop loss of 15000 & 14500 for this strategy. Means square off if you find nifty is trying to sustain beyond these levels. Or you can do this adjustment too.
If you find that Nifty is giving a breakdown and sustaining below 14500, then square off call spread and bring it down to 400 points lower levels.
The same thing you can do with put spread means if you got a breakout from 15000. You can shift your put spread to 400 points up.
BankNifty Analysis with weekly options strategies
After a profit booking on the Higher levels, we saw BankNifty took support at 31000 – 30500 zone. Now, this zone is acting as a good support zone and a breakdown will lead to further downside levels.
As per the Fibonacci tool, We may expect some range-bound activity from here that can lead to a sustainable upside rally in BankNifty.
But, do not just place a buy order here. I believe a good buy signal will generate only after a breakout from 35000. Till then you can trade with range-bound strategies.
Few levels to keep on radar this week: A breakdown from 32000 will lead to the next support level i.e. 30500. A breakout from 33500 will lead to the next resistance level i.e. 34000 & 35000.
Nowadays, IV is also on the higher side that too gives better opportunities for range-bound credit spread strategies. These strategies are not only helping in managing your risk but have a high probability of success too. You can check few examples for these limited risk range-bound option strategies here.
When you are trading with limited risk, your chances are high to make good and lose less which is the key to success in this market.
Bank Nifty Weekly options chain analysis
Based on option chain data, the highest Open interest stands at 32500 CE & 32500 PE, followed by 33000 CE & 31000 PE. PCR of all strikes is 0.66, which indicates a neutral market. PCR at 31500 stands at 10+, which is acting as an immediate support level.
The Put-call ratio at 33000 stands at 0.11, which is acting as a resistance level. Equally, important indicator Option Pain is at 32500, indicating weekly expiry at 32500. A shift in option pain will provide further levels.
Remember one thing: When IV is high, data can change anytime so keep following more closely.
If you don’t know how to analyze open interest for weekly options strategies. Just enrol for our Option Strategies – A Mentorship Program.
Bank Nifty best Weekly Options Strategy: Iron Condor
Possible adjustments for weekly options strategies :
If you find that BankNifty gives a breakdown and sustaining below 31300, 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 33200. You can shift your put spread to 1000 points up.
If you want to learn these Weekly options strategies and their adjustments in more practical ways with live mentorship, You can enrol in our Option Strategies – A Mentorship Program(33% OFF).
Much Check this also– Performance of the Option strategies, Nifty & BankNifty Weekly Options strategies, Nifty Option Strategy for Budget Session, A low-risk options strategy in LICHSGFIN, An iron condor options strategy in ICICIBANK, Reverse Jade Lizard options strategy in UPL, A high probability options strategy in YESBANK
Post your comments in the comment box if you have a query related to weekly options strategies. You can ask any question related to option trading in the comment box.
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*( Please avoid any question 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 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.