It formed a bearish candle on a daily frame and closed below 24,500 zones with losses of around 310 points.
βNow, till it (the index) holds below 24,500 zones, weakness could be seen towards 24,350 and then 24,200 zones, whereas hurdles are placed at 24,750 and then 24,850 zones,β said Chandan Taparia, Senior VP, Equity Derivatives & Technicals, Wealth Management at Motilal Oswal.
On the option front, the maximum Call OI is at 25,000 then 25,200 strike while the maximum Put OI is at 24,000 then 23,500 strike. Call writing is seen at 24,600 then 24,700 strike while Put writing is seen at 24,400 then 24,300 strike.
βOption data suggests a broader trading range between 24,000 to 25,000 zones and an immediate range between 24,300 to 24,700 levels,β Taparia added.
Chandan Taparia believes that one can ride the negative stance and expect that any small bounce could be sold for a downside move towards 24,300-24,200 zones.One can initiate a Bear Put Spread strategy to benefit from the bearish stance along with market volatility.
Bear Put Spread
Traders use this strategy when they expect the price of an underlying to decline in the near future. This involves buying and selling put options of the same expiry but different strike prices.
A higher strike price put is bought and a lower-priced one is sold. The higher-priced put is in-the-money (ITM) while a lower-priced one is an out-of-the-money option. This strategy results in a net debit for the trader as the cost of the ITM put gets adjusted with the cash flow from shorting the OTM put.
(Prices as of October 22)
Below is the payoff graph of the strategy:
ETMarkets.com(Source: Motilal Oswal)
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
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