Bulls held on with a firm stance above the 25,000 for most of the session with some volatile cues in between. After crossing the 25,300 mark, it witnessed profit booking in the second half but managed to close in gains of around 70 points.
“It (the index) formed a bearish candle on the daily frame but has been forming higher lows from the last three sessions. Now, it has to hold above 25,000, for an up move towards 25,300 and 25,500 zones, while supports can be seen at 24,900, followed by the 24,800 zone,” noted Chandan Taparia, Senior VP, Equity Derivatives & Technicals, Wealth Management at Motilal Oswal.
On the options front, the maximum Call OI is at 25,200, and then at the 25,500 strike, while the maximum Put OI is at 24,800 and then at the 25,000 strike. Call writing is seen at 25,100, followed by the 25,200 strike, while Put writing is seen at 25,100 and then at the 25,200 strike.
Taparie stated that the options data suggests a broader trading range between 24,600 to 25,500 zones, while an immediate range between 24,800 to 25,300 levels has been identified.
Overall, he believes that one can ride a volatile to a positive stance, initiating a Bull Call Spread strategy to get the benefit of a bullish stance along with market volatility.
Bull Call Spread
Traders may deploy a Bull Call Spread to monetize gains from a potential market rebound. It involves buying and selling call options with the same expiration but different strike prices. The purchased call is typically in-the-money (ITM) or at-the-money (ATM), while the sold call is out-of-the-money (OTM). This strategy results in a net debit for the trader, as the cost of the ITM/ATM call is partially offset by the cash flow generated from shorting the OTM call.
IMAGE 1
(Prices as of June 25)
Below is the payoff graph of the strategy:
IMAGE 2
(Source: Motilal Oswal)
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)