Nifty staring at key hurdle

I have sold one lot of Nifty 5,700 Call and 5,700 Put at 126 & 87 respectively. Can I hold this option till next expiry (November). Please advise. - Shajahan

Nifty: The index is ruling at crucial level. It faces strong resistance at 5,740 and the next one at 5,910. It finds immediate support at 5,502 and the next one at 5,257. Since the index had a sharp run-up, fall could also be swift and severe.

F&O pointers: The Nifty witnessed a rollover of just 15 per cent to November series. The next month series is still commanding a premium of over 35 points, signalling long rollovers. Cost of carry is also positive.

Option trading also suggests a positive bias, as November puts, particularly strikes 5,500 and 5,600, command higher open interest positions.

Volatility index: The Nifty Volatility Index closed at 14.54, which is the lowest level in 2012. Volatility Index is a measure, of the amount by which an underlying Index is expected to fluctuate, in the near term. Though generally the lower volatility bodes well for the market, contrarian view will also come into play at times. It signals too much confidence in the market. Whenever the exuberance reaches such a level, the market tends to correct quite sharply.

Strategy: Since we expect the market swing wildly, we advise you to exit your position, as the loss could be unlimited if Nifty makes a strong move in one direction, either up or down.

Nifty Futures has closed at 5,654, down in discount with an increase in open interest. While 5,600 PE witnessed unwinding, 5800 CE call saw heavy built-up. If Nifty futures opens gap down can I initiate a long? Will 5,600 be a support? - Kishore Lekhwani

Strategy: The Nifty futures did not close at the point you have mentioned; it closed at 5,684. The premium narrowed down considerably for October series, since the settlement is round the corner.

Strategy: It is better to wait and enter once it takes a clear direction.

Note: The analysis and opinion expressed in this column are based on F&O data available at this point of time and on technical analysis based on past price movements. There is risk of loss in trading.

Feedback or queries (on positions) may be sent to > f&o@thehindu.co.in , > blfuturesoptions@gmail.com by Sunday noon. Replies will be published on Monday .