F&O Radar | 2 Budget day strategies in Nifty: Deploy Bull Call Spread, Short Iron Butterfly to gain from range bound movement
India is in for a major event this week, the Budget, which has been crucial given the kind of spending the government of India is doing in certain sectors and which has a direct impact on the stock market, discounting every single statement and reflected in prices.
“Looking ahead, the market appears to be in a trailing phase, with the potential for continued exuberance driven by short-term news catalysts. However, our market sentiment analysis based on this week’s Market-Breadth data indicates a subtle inflection in the ongoing upside momentum. The Sentiment Forecast Plot (shown below) has shifted to the bottom-left quadrant as of Friday, 19th July 2024, suggesting a possible shift in underlying sentiment. The deterioration in breadth numbers indicates a potential slowdown with limited upside in the near term,” said Sahaj Agarwal, SVP of Derivatives, Kotak Securities.
(Source: Kotak Securities)
“We believe the trend change point or support for Nifty50 is placed at 24,270 on a spot closing basis, above which dips could be used to enter on the long side. However, risk management becomes crucial as the event approaches. The environment is moderately bullish, as the upside potential is limited due to weak breadth numbers,” Agarwal added.
Additionally, the 10-day historical volatility is above the 30 Day historical volatility indicating the prices are realising increased. On the other hand, the future volatility which is indicated by IV is rising and is now at 14.83 vs 12.7.
“We believe as we move towards the
