September 6, 2020


By Roy

At the beginning of the last week, the India Vix was low and it was just a matter of time for volatility to go up. The market was full of longs and shorts were waiting to pounce on any bad news. First bad news came from India China border skirmishes and then later on the day, it was 1/4 shrinkage of GDP. Global indexes also gathered a lot of froth and some crackdown was imminent. Nasdaq 100 halted it 7-8 days rally and cracked up big time, dow jones, European indexes followed suit. After the fall, the market looks much more balanced.

Last week, I started with selling with 11200 put and 12000 call. As the market declined sharply, the vix shot up and due to which I had to hedge my downside risk. I followed the classical option hedging strategy by buying 11000 put and selling 11950 call of Nifty. The total premium received during the week Rs. 26.50 and the premium paid for hedging is Rs. 13. So, the net premium received is Rs. 13.50. The total return in 6 days works out to be 0.83%. After a sharp fall, like this, most sellers tend to lose money who does not follow proper hedge, that is why spare capital and hedging is so important. Last week’s post can be seen here.

Now let us see what holds for us in this week’s expiry.

Nifty Daily

Till nifty breaches 11250 on the downside, I will not have a bearish view on Nifty. As per my analysis, Nifty is holding key levels and may trade with a neutral bias. Most longs are taken out and market looks relaxed now. Nifty was supported by IT stocks during the fall.

Bank Nifty

Previous week’s post, I mentioned the importance of 23250 levels for Bank Nifty. During the fall, BNF tried to hold that level. But on the last Friday session, it went below that sacrosanct level which puts doubt in my mind. It came back from it 200DMA. The next support for the Bank Nifty is 21000.

Nifty IT

As I mentioned earlier, Nifty IT was unable to break 18400 levels and corrected from there. It closed exactly at 20DMA.

Nasdaq 100

Major support for Nasdaq is at 11200, and falling sharply till that point, it retraced back. It will  be interesting to see whether Nasdaq can hold these levels.

This week the IPO of Happiest Minds will open and I have written a detailed post about it here. I am expecting a bumper response and listing of this IPO.

Disclaimer – I am applying.

Weekly Expiry Strategy

I have sold 10900 Put option of Nifty at 16.00 and Sold 11800 Call option of Nifty at 9.00. Both for the 10th September 2020 expiry. I sold this strangle on Friday.

Disclaimer: This is not a buy or sell recommendation. I am not a SEBI registered advisor. I sell options and quite aware of the risk associated with it. I have kept surplus funds for any adjustment that may be needed due to evolving market conditions. This post is only information, not a recommendation.