Analysis and Game Plan - 22 October 2018

Analysis -

  • Dow Jones closed negative on weekly charts. Trend is down on daily and hourly charts.

  • Rupee and Crude Oil are not worrying factors right now.

  • SGX Nifty is trading flat.

  • Results of HDFC Bank are out. No body can say how will market react to it. Above 2025, it will give a gapup to Bank Nifty. Below 1950 to 1925, can give gap down to Bank Nifty.

  • Vix shot up to 19.79. More volatility ahead. I tend to remain on the sell side in high vix.

  • Result of Kotak Bank are scheduled on 24 October 2018 along with IDFC Bank. Kotak is an Index Heavy Weight so might add to volatility in Bank Nifty.

  • Result of Yes Bank are scheduled on 25 October 2018. It is an average weighted stock in Bank Nifty and might have an impact on volatility. Other stocks can easily negate its movement.

  • Results of ICICI Bank are scheduled on 26 October 2018 so it may remain stable before giving any adverse movement.

  • Nifty - Max Pain and PCR moved down, which is a bearish signal.

  • Nifty calls were written aggressively in current month at 10400/10500/10600 strikes. Puts were unwind at 10500 and 10400.

  • Nifty witnessed put writing in current month at 10200 and in next month at 10100 suggesting Nifty can touch 10200 levels.

  • Bank Nifty - Max Pain and PCR moved down, which is a bearish signal.

  • Call writing was normal and does not indicate a trend. Put unwinding was seen at 25000 where as further put writing absent.

  • Future OI suggests shorts being added to Bank Nifty.

  • Since it was first day of weekly options, not much speculation was visible.

Conclusion -

  • Premiums may remain high till the results are out for Kotak Bank.

  • It is better to sell hedged calls for over night positions.

  • Nifty may touch 10200. Bank Nifty may touch 24600-24700 before giving a definitve direction.

  • Overall outlook is from sideways to bearish bias.

Game Plan -

  • I am only holding 2 lots of bear call spread. -2 X 25500 & +2 X 25700.

  • I am still bearish. 25250-25300 is my stoploss where I will exit this position if it goes against me.

  • I will take 2 lots between 11:00 am to 12:00 pm. Another 2 lots, I will add by the closing hours.

  1. Market Opens Flat (25000-25200) - Wait and watch for direction. Will close my positions at 25250-25300 if the momentum is strong. Although I am not inclined in exiting in first 30 minutes. If 25500 is taken out, will add Call Calender.

  2. Market Opens Gapup (25250-25350) - If no retrace, will exit open positions. Above 25500, will add call calender. If it starts to come down below 25200, then will add bear call spread.

  3. Market Opens Gapdown (24900 and below) - No need to touch open positions. On any retracement towards upside, will add a bear call spread.

  4. Any movement between 25950-25214 will be a sideways movement and will not call for any action, unless market has risen from a gapdown. In gapdown rising scenario, I will add bear call spread. If market opens flat and remains sideways then position depends upon market factors which are unknown right now.

  5. In case of extreme gapup - Positons are hedged, so I do not need to worry much. I will wait for it to retrace to my levels.

Stock Update - May or may not execute based on risk reward and return on capital deployed.

  • Ashok Leyland - Might sell calls of 120, if it crosses 111 to the downside. Also dependent on the premium I am getting.

  • Hindalco - Below 222, might sell call of 230/240.

  • Reliance - At 1128 or below 1080, may initiate a short.

  • State Bank of India - Calls can be sold below 260.

Open positions as of now are: -

19 October 2018 - 25 October 2018.xlsx


Rohit Katwal






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