F&O Radar | Deploy Long Iron Condor in Nifty to benefit from a range bound market
Fed policy outcome, the Nifty experienced significant volatility. In the first half, it rose towards the 25,500 levels; however, in the second half, it surrendered all gains and fell below the 25,300 levels. Nonetheless, it managed to recover half of its losses and closed near the 25,350 levels.
“So, technically, the range is 25,200 to 25,500, and it is currently exactly in the middle of that range. From a derivatives point of view, there is the highest open interest (OI) on the call front at the 25,500 strike, whereas the put side shows the highest OI at the 25,000 strike, indicating a range of 25,000 to 25,500 levels,” said Jay Thakkar, Vice President and Head of Derivatives and Quant Research at ICICI Securities.
The implied volatilities (IVs) bounced back from 12 to 14, representing a 16% increase, while the India VIX rose by 6.5%. As a result, ahead of the Fed policy announcement, the IVs increased; hence, in the case of a non-event, the IVs are likely to cool off. However, if the outcome turns out to be unexpected, it could move even higher.
The BankNifty and FinNifty have been supportive, while most other sectors have corrected, particularly the IT sector, which lost more than 3.5% and added more pressure on the Nifty.
“Nifty PCR stands at 0.90, slightly below 1, which is considered to be a bit negative to sideways. It is trading near its max pain level of 25,350, while also trading above its modified max pain level of 25,191, indicating a sideways to bullish outlook in the short term,” added Thakkar.
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