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We had recommended a long strangle strategy in Nifty options expiring on January 31 in the previous column. This strategy was initiated by buying a Nifty 6,000 call and Nifty 5,800 put for the January series.
Last Monday, 6,000 call opened at Rs 79 and 5,800 put opened at Rs 54. We recommend to sell the Nifty 5,800 put in the up coming week while keeping the Nifty 6,000 call position open.
The maximum loss will be premium invested in the 6,000 call, and this will occur if the Nifty closes below 6,000 at the time of expiry.
It has to be noted that this position has to be closed if Nifty approaches near 5,950 within two weeks; else close the position if it is profitable.
In the Nifty futures segment, December, January and February futures closed at a premium of 5.7, 56.3 and 90.5 point respectively compared to 35, 71 and 102 last week.
In the options segment, for December call series, 6,000 call has the highest open interest (OI) positions (1.27 crore contracts) followed by 5,900 call (85.4 lakh).
For December put series Nifty 5,800 put has the highest OI (90.7 lakh) followed by Nifty 5,700 put (78.2 lakh).
Since OI in the call segment is far higher than the put segment, the gains in the index will be limited.
India VIX, that measures the expected volatility in Nifty, closed at 14.63 compared with 14.23 last week.
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