F&O Radar | Deploy Bull Call Ratio Spread in Nifty to play range bound index expiry
Nifty's positive trend confirmed by MACD signals and derivative data. Analysts advise caution due to FII net % long levels. Traders recommended a bull call ratio spread strategy for limited upside potential. Expert disclaimer underscores the need for individual analysis in trading decisions.
has been forming higher tops and bottoms, and the overall trend seems to be positive in the short term. It is trading well above its short-term moving averages as well as it has provided a breakout from the sideways consolidation on the hourly charts.The momentum indicator MACD is well in the buy mode on the hourly as well as on the daily and weekly degrees thus confirming the uptrend.
“On the lower side, 24,200 to 24,000 is an immediate support whereas 24,500 is an immediate resistance, so the immediate range for the Index is 24,200 – 24,500 levels,” said Jay Thakkar, Vice President & Head of Derivatives and Quant Research, ICICI Securities.
As far as the derivatives data is concerned, it has seen some good long built up seen past 3-4 days indicating good support at the lower levels, however, the FII net % long is above 80% so that is a short term concern as it has reached to the upper end of the range and this may lead to some pause or reversal in the Index, however, till we continue to see higher tops and bottoms one can keep riding the trend on the upside, added Thakkar.
In this weekly expiry session, the Nifty may trade within a range of 24,250 to 24,500 i.e. almost 1% range. Hence, Jay Thakkar suggests a limited upside strategy to play the range.
Bull Call Ratio Spread
A call ratio spread is a strategy where you buy a bull call debit spread and sell an extra call at the same strike price as the short call. This creates a risk-defined position with limited profit potential. The aim is for the stock price to be at the short strike prices at expiration.
ETMarkets.com(price as of July 3)
Below is the payoff graph of the strategy:
ETMarkets.com(Source: ICICI Securities)
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
Source: Stocks-Markets-Economic Times
