Header Ads

Header ADS

Nifty 50 Struggling to Rally: A Strategy for F&O Traders!

Nifty 50 Struggling to Rally: A Strategy for F&O Traders!

The Nifty 50 index has been suffering for the final many periods to choose up a direction. Although the wider fashion remains now no longer bullish, the downtrend appears to be abating. This type of consolidation amid a downtrend is surely a very good signal for bulls as this fee motion usually ends in a reversal.

In the preceding article, I analyzed an alternatives promoting approach (hyperlink on the bottom) that is turning in exact income with the aid of using now because it turned into extra centered at the sideways variety of the Nifty 50 index with a hedge above 17,450. As the index remains now no longer going anywhere, here`s every other approach for high-chance buyers which may be explored, if their view is bullish from here.

By now it's miles clean that 16,825 - 16,850 is a great base underneath which the index isn't falling. Keeping this in mind, competitive buyers can begin to consider going lengthy at the Nifty 50 index, even earlier than the resumption of the uptrend. However, if the index continues on buying and selling in a variety, basically going nowhere, buyers might lose their treasured time. Hence a barely changed approach of lengthy futures is changing it right into a included name approach.

It clearly approach going lengthy at the underlying (Nifty 50 futures on this case) and brief promoting an OTM name option. How does that work?

With each positions on (lengthy futures and brief OTM CE), buyers can decrease the chance at the drawback as though Nifty 50 breaks the 16,800, the futures role must be exited with a loss because of an infinite drawback capability. To a few extent, the loss might be included with the aid of using the quick CE as it's miles a counter exchange and might flip profitable.

In the second one case, if Nifty 50 is going nowhere, then the OTM CE might nevertheless preserve giving moderate income as a consequence of theta decay, at the same time as the futures role might stay nearly breakeven.

In the 0.33 viable scenario, if Nifty 50 rallies from here, that might be the nice case because the underlying futures might begin minting cash for you with a capability of limitless profit, at the same time as the loss from the CE might be much less because of a lesser delta, ensuing in exact internet income.

Now the query is which strike fee to move brief on? Traders can search for any strike above 17,200, as according to their consolation however one factor that wishes to be taken into consideration is CE must be of the contemporary weekly expiry. If that expires nugatory after a week, then new CE for the then-contemporary week may be explored to move brief.

No comments

Powered by Blogger.