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Below the Quote on Bank Nifty expiry strategy by Shrey Jain, Founder & CEO SAS Online - India's Deep Discount Broker

Let’s start with an internal analysis of BNF with its underlying components and their breadth on a higher timeframe, more than 75% of stocks are above short-term 5 and 20 MA. The MACD for underlying continues to be positive on a rolling basis and shows strength. Though, the profit booking in Broader indices after last week's breakout has pushed stocks to a negative zone on the smaller timeframe, we will focus on a higher timeframe.

The OI analysis for 29^th May points to a broader range of 48500 to 49500 and ATM IV is at 19.10, the 49100 straddle is priced at 390.85 and the strangle of above range is at 105.15. Technically support for BNF stands at 48600, while upside remains open to higher levels of 49600 – 50000.

Since, the market would await till Exit poll and in such uncertainty, a directional bet would be risky. Hence, We will deploy strangle for the 29^th May expiry. A strangle is an options strategy that is deployed using an out-of-the-money (OTM) call and put with different strike prices in the same expiration cycle.

When both the call and put are sold it is known as a short strangle. The profit with a short strangle is highest if both the options expire worthless where the credit received for selling the two options becomes max profit.

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