Bank Nifty index fell to a crucial support zone of 50,350 – 50,300 during Wednesday’s session and bounced back amid buying interest at those levels. However, the banking index closed 117.60 points, or 0.23%, lower at 50,685.55.
On the weekly charts, Bank Nifty has been underperforming the benchmark Nifty 50 index. The sentiment remains subdued as the Bank Nifty index has been in a consolidation range of 49,600 to 50,800 over the past three weeks.
Rahul Ghose, CEO of Hedged.in noted that Bank Nifty is bouncing from its support level at 49,500, indicating slight bullishness in the index. However this bounce is not significant, suggesting a weak bounce.
Keeping this view of sideways to upside in the index, Ghose suggests a low-risk Bank Nifty options strategy from hedged.in.
The strategy makes money if the Bank Nifty moves up or stays sideways by the end of 28th August expiry. What’s best about this trading strategy is that, even if the Bank Nifty does not move up, the loss in the trade is low at ₹1,500 only,” Ghose said.
Here’s Bank Nifty trading strategy today from Rahul Ghose:
Bank Nifty Modified Call Butterfly
Trade Structure:
> Buy 1 lot of the 28th August expiry 50800 CE at CMP
> Sell 1 lot of the 28th August expiry 51200 CE at CMP
> Buy 1 lot of the 28th August expiry 52400 CE at CMP
> Sell 1 lot of the 25th September expiry 52500 CE at CMP
Trade Rules:
The capital required in the trade is ₹53,000. This trade can be entered today if Bank Nifty is trading between the levels of 50,600 and 50,800. The maximum loss in the trade is ₹1,500 and the target in the trade should be 2% to 3% on the capital depending upon the time and individual risk appetite, Ghose said.
Trade Modifications:
The trade is protected and a modification is required only when the Bank Nifty spot price goes below 50,000 levels only. If this happens, the August end expiry sold call can be brought down from 51,200 to 51,100 or 51,000 levels and also the September end sold call with the offset unit can be brought down further by 500 points to get more credit. The trade can be tracked live on www.hedged.in to track any modifications, Ghose said.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.