Expiry Day Options Trading Strategy and Derivatives Data Analysis

Expiry Day F&O Trading Strategy - January 27

by Ruchit Jain Last Updated: Sep 07, 2023 - 05:09 pm 39.6k Views

In last one week, we have seen a decent correction in the market where Nifty has corrected from the high of 18350 to sub-17000 zone. The index recovered from the lows in Tuesday’s session and ended at 17277.


Open Interest Analysis -

The recent correction in Nifty was mainly because of short formation in Nifty as we saw decline in prices and rise in open interest. The INDIA VIX rose sharply to 24 which is a sign of higher volatility. Although we have seen a sharp surge in the volatility index, we believe these are not alarming levels and hence, one should not panic due to the same. Historically, it is usually observed that IV’s increase ahead of big events and once the events are passed; they cool-off which results in stability in prices.


FII Data Analysis

During the start of the January, FII’s had covered their shorts and then went to form long positions in the index futures segment. This supported the markets and hence, the Nifty surpassed 18000 mark with an ease. However, as the global markets saw some sharp correction, FII’s turns sellers in cash segment and they also sold index futures and their ‘Long Short Ratio’ plunged below 50 percent. They also formed decent short positions in stock futures in last few sessions.


Options Data Analysis

Options data indicates support around 17000 mark as the put option of this strike price has decent open interest outstanding. On the flipside, decent open interest is seen in 17500 call options indicating resistance level. Recently, we have seen a good relative outperformance from the Bank Nifty index certain stocks from this space has witnessed short covering as well as long build up. So, this space should take the leadership to drive the markets in the near term and hence, we expect the relative outperformance to continue.


Expiry Day Strategy

On the expiry day, the global market event as well as the positioning in our markets is likely to derive the momentum. Bank Nifty’s move recently has been encouraging and hence, this space should help market to come out of the woods. The Nifty-PCR OI too indicate oversold market scenario, and hence, we could see a relief rally on the expiry day.

Hence, traders should look to trade with a positive bias and buy at-the-money call option of Bank 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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