Nifty Option - Tips and Strategy for Trading in Bank Nifty Option - India Infoline (2024)

FAQs

Which option strategy is best for Bank Nifty? ›

Consider using the cash-secured put strategy to build up your Bank Nifty stock portfolio before beginning the covered call strategy. Cash secured Put is an options trading strategy that involves selling put options on an underlying asset with the intention of buying the asset if the option is exercised.

Time period generally considered is 20 days. Readings above 80 indicate a security is overbought. Readings between 55 & 80 indicate Bullish condition. Readings between 45 & 55 indicate Neutral condition.Readings between 20 & 45 indicate Bearish condition.Readings below 20 indicate a security is oversold.

The strategy combines three indicators: Exponential Moving Average (EMA), Weighted Moving Average (WMA), and Average Directional Index (ADX). The EMA and WMA are used to track the average price over different time periods. The ADX measures the strength of a trend in the market.

In India, some experts consider the best time frame for intraday trading to be from 9:30 AM to 10:30 AM and from 2:30 PM to 3:15 PM.

If you are looking for an option selling strategy that has unlimited profits with limited risks, then the synthetic call strategy is the best way to go. As part of this strategy, the trader purchase put options on the stock that they are holding and which they think will rise in the future.

BANKNIFTY futures contracts have a maximum of 3-month trading cycle - the near month (one), the next month (two) and the far month (three). A new contract is introduced on the trading day following the expiry of the near month contract. BANKNIFTY futures contracts expire on the last Thursday of the expiry month.

When to trade in Bank nifty options? ›

The importance of Bank Nifty lies in the fact that it provides investors with a benchmark for the market performance of the Indian banking sector. Trading nifty or stock options in intraday trading are possible. Most traders open a position at the beginning of a day, and close it near the end of the day.

Bank Nifty is calculated using the free float methodology where the stocks are weighted based on the free float market capitalization. While the Bank Nifty was launched on September 15, 2003, it uses January 01, 2000 as the base year with a base value of 1000.

The “9:20 AM” time in the strategy name is the execution time. India's share market opens at 9:15 AM. So, just after 5 minutes, this strategy is executed. For other countries too, the execution time will be 5 minutes after the market starts.

The Intraday Momentum Index or IMI is the best indicator for option trading. Here are some of the key characteristics of the indicator. It is known to be highly popular among the option traders who place intraday positions.

The short butterfly options strategy involves buying two at-the-money call options, selling two out-of-the-money call options, and then selling one in-the-money call option with a lower strike price.

In terms of market capitalization, the Nifty50 is much larger than the Bank Nifty, since it is a broad market index comprising of 50 stocks as compared to 12 stocks in the Bank Nifty.

Here is how. Let the index/stock trade for the first fifteen minutes and then use the high and low of this “fifteen minute range” as support and resistance levels. A buy signal is given when price exceeds the high of the 15 minute range after an up gap.

Overall, for beginners, it is better to start options trading with Nifty Index as it is less volatile and most traders are already familiar with this index.

As per the new rule, the weekly expiry of Nifty Bank contracts will take place every Friday. In case there is a trading holiday on Friday, then the previous trading day will tend to become the expiry day. NSE has reduced the market lot size for Nifty Bank F&O to 15 from 25.

What is the 5-minute gold scalping strategy? ›

It is one of the most popular strategies among gold scalpers. It got its name for the 5-minute timeframe, which means you are supposed to perform a trade within the next 5 minutes. However, it is not as simple as some may think, as it calls for the H1 period to perform the major trend analysis.

First off, both SMA and EMA are the best indicators for 1 minute scalping. The Simple Moving Average (SMA) tracks the average closing price of the last number of periods. For example, a 50-day SMA will display the average closing price of 50 trading days, where all of them are given equal weight in the indicator.

The 1-Minute Breaks strategy is a high-tempo trading strategy which gives numerous signals. This is typical for a strategy in a 1-minute time frame. The signals are filtered using the Supertrend indicator and volatility. Nevertheless the trader must use a degree of discretion to judge which signals to use.

Using Simple Moving Average as Nifty Trend Finder

If the close of Nifty is above the 5-day SMA the short term trend is UP. Similarly is the close of the Nifty is below the 5-day SMA, the trend of the Nifty is down. This chart will be updated automatically every day after the market hours.

What are the safest options strategies? Two of the safest options strategies are selling covered calls and selling cash-covered puts.

One strategy that is quite popular among experienced options traders is known as the butterfly spread. This strategy allows a trader to enter into a trade with a high probability of profit, high-profit potential, and limited risk.

The National Stock Exchange has reduced the market lot size for Nifty Bank futures and options to 15 from 25. The new rule is applicable from the beginning of July 2023 contracts.

Is it risky to hold options overnight? ›

Overnight positions can expose an investor to the risk that new events may occur while the markets are closed. Day traders typically try to avoid holding overnight positions.

The market lot size for Nifty Bank futures and options has been reduced to 15 from 25, effective from the beginning of July 2023 contracts.

So to buy an option at Rs 100, you need to have only Rs 5000 ( Rs 100 x 50), but to write an option you will need around Rs 25,000 which is marked to market daily, which means that if there is a loss you are asked to bring in those funds to your trading account by end of the day.

Overall, for beginners, it is better to start options trading with Nifty Index as it is less volatile and most traders are already familiar with this index.

For Bank Nifty, Anil Singhvi suggests that intraday and closing stop loss should be 39,250 because you have got the cushion. But, if you want to keep a longer stop loss keeping expiry moods in view then keep the stop loss at 39,000.

On the valuation front, Bank Nifty offers more comfort compared to Nifty IT at this point. We continue to like ICICI Bank in the large private banking space, SBI in PSBs, and Equitas Small Finance in the midcap banking sector.

The importance of Bank Nifty lies in the fact that it provides investors with a benchmark for the market performance of the Indian banking sector. Trading nifty or stock options in intraday trading are possible. Most traders open a position at the beginning of a day, and close it near the end of the day.

In the case of call options, there is no limit to how high a stock can climb, meaning that potential losses are limitless.

How to place stop loss in Nifty options? ›

For instance, suppose you are content with your stock losing 10% of its value before you exit your trade. Additionally, let's say you own stock trading at ₹50 per share. Accordingly, your stop loss would be set at ₹45 — ₹5 under the current market value of the stock (₹50 x 10% = ₹5).

NEW DELHI: In a bid to boost retail participation in the derivative segment, the National Stock Exchange (NSE) has reduced the market lot size for Nifty Bank futures and options to 15 from 25. The new rule is applicable from the beginning of July 2023 contracts.

From our experience, mean reversion strategies tend to be the most profitable. One of the reasons for that is that the market moves sideways more of the time than it trends. Even when it trends, it moves in waves that often oscillate around its moving average.

Buying Calls Or “Long Call”

Buying calls is a great options trading strategy for beginners and investors who are confident in the prices of a particular stock, ETF, or index. Buying calls allows investors to take advantage of rising stock prices, as long as they sell before the options expire.

1. Selling Covered Calls – The Best Options Trading Strategy Overall. The What: Selling a covered call obligates you to sell 100 shares of the stock at the designated stripe price on or before the expiration date. For taking on this obligation, you will be paid a premium.