Derivatives Data Analysis and Expiry Day Trading Strategy


by Ruchit Jain Last Updated: Sep 07, 2023 - 05:09 pm 38.7k Views
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Nifty has witnessed a sharp correction at the start of this week and it almost tested 17000 mark in the follow up selling on Tuesday. However, the indices recovered sharply from the low of 17040 and has ended tad below 17500 ahead of the weekly expiry day.

Open Interest Analysis

In the recent correction from 17800 to 17040, we witnessed short formation in Nifty. However, as the market approached the support of 17000-17050, short covering was seen ahead of the expiry day as the weekly expiry session also coincides with the RBI Monetary Policy outcome. 

Implied Volatility in Nifty is back to its normal range which shot up during Budget. 

During the week, Nifty PCR-OI also plunged to 0.70 which was a sign of an oversold zone.

Certain index heavyweights are witnessing buying interest as there is some rise in open interest along with price up moves.

FII Data Analysis

FII's continued to sell equities in the cash segment. However, in the index futures segment they covered some of their short positions  ahead of the event.   

However, majority of the positions of FII's in the index futures segment is still on the short side as their 'Long Short Ratio' continues to be below 50%. But it will be interesting to see their positioning hereon as any positive trigger can lead to short covering by the stronger hands. 

They have formed some long position in the stock futures segment indicating stock specific buying interest.

Options Data Analysis

As the market recovered from the lows in last couple of sessions, the call writers were seen unwinding their positions while put writers have added fresh positions which is a positive sign. 

17400 put option have decent open interest build up which indices support around this level for the expiry day. 

For expiry day, below are the support and resistance levels for the index

Nifty Supports - 17375 & 17290

Nifty Resistances - 17565 & 17700

Bank Nifty Supports - 38300 & 38000

Bank Nifty Resistance - 39000

Expiry Day Strategy

On the expiry day, the RBI Policy outcome is likely to drive the market momentum. However, the data indicates that any positive trigger could lead to further short covering in the market. 

Hence, traders should look to trade with a positive bias and buy at-the-money call option of Nifty in intraday dips on the expiry day.

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About the Author

Ruchit Jain is Lead Research Analyst at 5paisa. He has a vast experience of 14 years in this field and is proficient in Technical and Derivatives Research. He has completed his CMT (U.S.A.) and has done Masters in the field of Finance at Mumbai University.

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