Weekly Options Strategy: Go for short Strangle where profit will be made in 17,250-17,850 range

Sell 1 lot Nifty 27 October 17300 Put at 28 & Sell 1 lots 27 October 17800 Call at 28, Total premium in-flow: 56; Target: 6; Stop loss: 86.

Rationale

Ahead of the festive season, the buying spree continued across the sectors, which helped Nifty to club 2% for the week. At the same time, US equities recovered from their 52-week low due to better than expected earnings from a few US companies. While FIIs remained negative in the cash segment for the month of October, and sold stocks worth around Rs 8,500 crore, their quantum has declined significantly this week and in a few sessions they even turned positive.

In the current move above 17,500 levels, heavyweights outperformed whereas midcap and smallcaps rose less than 2%. However, the overall setup remains positive and we believe midcap stocks from banking, pharma, cement, and technology will attract some money inflow in the coming days.

On the data front, FIIs’ net short positions have declined marginally on a weekly basis. Now their net short OI stands at near 0.80 lakh contracts, down from 0.92 lakh. However, they increased their long bets in the stock future segment and now it stands at near 65 lakh. With their long bets in stock futures at a one-month high, we expect buying momentum to continue.

We feel in coming days, 500 points of range-bound sessions cannot be ruled out, we feel trader can go for short Strangle where profit will be made within the range of 17,250 to 17,850. However, one needs to be careful on both sides also, as the strategy will start making losses if Nifty moves above or below the given range.

Trader will be in maximum profit if Bank Nifty closes between the 17253 and 17850 on 27th October expiry.