Monday – Deploy low risk ‘Call Butterfly Spread’ strategy on Nifty in truncated week –

The week gone by saw Indian markets gyrating with both Bull and Bear being active. With the onset of election polling, intraday volatility spiked up in the market.

The Nifty50 spot traded in the range of 11500-11700 and ended the week with a loss of 0.19 percent at 11,643. The BankNifty band was wide at 29,600 to 30,200 and closed with a loss of 0.49 percent to 29938.

Auto, Pharma, and FMCG were the top gainers for the week. Auto stocks like Ashok Leyland, Tata Motors, Bajaj Auto gained over 5 percent each while beaten down FMCG stocks like Hindustan Unilever along with ITC saw the move of 3.5 percent.

Pharma stocks like Lupin and Cipla gained over 5 percent each. The metal sector was underperformer mainly stock like Vedanta, Sail and Jindal Steel were the top losers.

Over the week midcap stocks like PC Jeweller and Infibeam gained over 12 percent as a mix of short covering and longs was seen. NBFC stock like Ujjivan saw significant long of 6 percent with OI increase of 34 percent while reality stocks like DLF saw short getting added with the price down by 9.5 percent and OI up by 27 percent.

Future data of Indices depicts short in BankNifty while long unwinding was seen in Nifty for the week. With the onset of Q4 results, IT stocks were under limelight as pullback was seen both in TCS and Infy towards their important Put strike of 2000 and 730 respectively.

As results were announced post-closing on Friday, the impact could be witnessed on Monday with cooling off of Volatility.

The Nifty options data saw Monthly 11500-11600 Puts providing strong support and prices saw a rebound, higher end 11800 now act as an immediate vital resistance with Call OI of 2.2 mn shares.

Weekly Nifty range gets narrower to 11600-11700 with an early indication of 11700 Call writers squaring off was seen at end of Friday session.

Considering coming week being truncated with only 3 days working, option writers were seen placing bets on either side to take advantage of the time decay. The Nifty PCR open interest wise stands at 1.54, keeping the room open on the upside.

With uncertainty prevailing over election outcome, Nifty May expiry implied volatility saw an uptick resulting in a spike in India VIX by 260 bps to 20.99.

With Nifty future taking support near its gap area and Spot Nifty forming multiple bottoms at 11550 and reversing from lows shows bull strength.

Further placement of put writers at 11600 with an unwillingness to cover shows positive bias in the market. Thus bullish strategy is advisable. Considering truncated week, low-risk strategy Call Butterfly Spread is recommended.

Call Butterfly Spread is bullish to range bound strategy that offers decent Reward to Risk with low cost. In this Strategy, we need to buy 1 ATM Call, Sell 2 OTM Calls near target level and Buy 1 further OTM call to hedge the risk.

Maximum profit in this strategy is at Call written strike. As theta decay is fast in weekly options, it is idle for deploying Call Butterfly Spread.

(The author is CEO & Head of Research at Quantsapp Private Limited.)

Disclaimer: The views and investment tips expressed by investment expert on are his own and not that of the website or its management. advises users to check with certified experts before taking any investment decisions.

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