Nifty Strategies

In Nifty options, the far+mid OI is around 31 per cent. That's healthy without being outstanding. The mid and far put-call ratio (in terms of OI) is incidentally around 1.32, which seems rather low for this stage of settlement where 1.8 or higher is often registered.

Overall index PCR (OI) is around 1.37, which is in the normal range but we saw lower intra-day values on Friday. The stock option PCR was abnormally high at 0.4 given that it's rarely above 0.2. Stock option volumes were also fairly high. This could mean that sophisticated traders have finally started using these instruments to hedge in preference to options. Or it could mean that the fear factor is quite prevalent and even bulls in specific stocks are hedged. Perhaps it means a bit of both.

A bullspread of long June 4400c (47.55) versus short 4500c (18.55) costs about 29 and pays a maximum of 71. A bearspread of long June 4300p (68.2) and short 4200p (43.65) costs 25 and pays a maximum of 75. Both these spreads are likely to be struck and both offer excellent risk-reward ratios with expiry risks as an add-on !

If you're looking for wider spreads, a long July 4500c (105) and a short 4700c (52.6) offers a potential maximum return of 146 on a cost of 54. Similarly a long July 4300p (189) and a short 4200p (149) offers a potential maximum return of 60 on a cost of 40. The July put chain is short of liquidity below the 4200 mark.