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    Options strategy: Nifty Bank may turn range bound; go for Short Straddle

    Synopsis

    As we are keeping our view consolidation hence we advise traders to go for a short straddle option strategy. It is a 2-leg option strategy and consists of selling ATM strikes of Calland Put options.

    Options strategy: Nifty Bank may turn range bound; go for Short StraddleAgencies
    Strategy Positions

    Buy 3rd June 35,600 Call strike at 415-420 ;

    Sell 3rd June 35,600 Put strike at 420-430;

    Target: 350; Stop loss: 1050 (1 Lot Each)

    Rationale
    Bank Nifty rollover was in line with its 3 months average whereas few stocks like Axis bank and HDFC Bank which saw good amount of short addition in May series has witnessed closure. We believe the current leg of short coverings in few private banks should continue.

    Bank Nifty has started the June series with an optimistic note. Sizeable Call OI base is placed at 35500 strike and the index has managed to give a weekly close above this level which is a positive sign. Major Call OI concentration has moved higher to 36500 strike which should be looked at as maximum upsides in the current week expiry.

    As we are keeping our view consolidation hence we advise traders to go for a short straddle option strategy. It is a 2-leg option strategy and consists of selling ATM strikes of Calland Put options.

    We feel a 1,000-point range bound session cannot be ruled out in the coming days after the 2000 points of rally witnessed in the last two weeks, we feel traders can go for a short straddle of ATM 35600 strike where profit will be made within the range of34700 to 36500. However, one needs to be careful on both sides also as strategy will start making loss if Bank Nifty moves above or below to the given range.

    Traders will be in maximum profit if Bank Nifty closes near 35600 levels on 3rd June expiry.

    Payoff diagramET CONTRIBUTORS


    (The author, Raj Deepak Singh is Analyst – F&O, Currency, and Commodities, ICICIdirect)

    (Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)



    (Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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