Nifty Alternative Strategy: Nifty Alternative Strategy: Consider it as a bull call ladder

Strategy location

26 May 16300 Buy 165 Call; Sell ​​26 May 16600 Call 52.5 and Call 26 May 16800 19.5 (1 lot each)


The Nifty has experienced another extremely volatile week with more than 400-point progress in 3 of the 5 sessions. However, the short covering move seen on Friday helped the Nifty close the week with a gain of around 2.5%. In addition to technology, most sectoral indicators have closed in green for weeks. Going forward, a move above the 16,350 series VWAP will be crucial for the ongoing recovery in Settlement Week.

From a data point of view, FIIs’ short positions have declined sharply as their net shorts in index futures have dropped from 1.25 lakh contracts to 77k contracts, along with a long position in the stock futures division. So if the Nifty stays above 16,350, it is likely to continue to move towards 16,800.

We keep our outlook moderate bullish and so, we recommend traders to follow the bull call ladder alternative strategy. This is a three leg option strategy and involves buying an ATM strike of call options and selling two higher strike call options.

Leaving the target between 16,600 and 16,800, we think traders can go for the bull call ladder strategy where the maximum profit will be between 16,600 and 16,800. However, one should also be wary of higher as the strategy will start to hurt if the Nifty moves above 17,000 in the current settlement.

If the Nifty stays in the 16,380 to 17,020 level or expires, traders will be in profit.

Pay-off diagram

Nifty is

(Disclaimer: The recommendations, suggestions, opinions and opinions offered by the experts are their own. These do not represent the views of the Economic Times)

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