4000 levels on Nifty is a good support and it should be hovering around it for sometime, unless something drastic triggers in either direction. But I don't see any major activity or release of news/information in the near term calendar. In times like these, best strategy would be to sell an option so that its value would be decreasing due to the Nifty staying around the same levels without major movements and the decrease in the Days to Expiry. An option price depends on 5 factors out of which the underlying and the Day to Expiry are 2. So, now you may sell a well out of the money Call option, take a premium and square it off in a few days when the market is at the same levels, as its value would have decreased due to the lesser number of days to expiry. You shouldn't be waiting too much to book your profit, as the sentiment could turn other way over night. It's a very common mistake that people do, taking the first position at the right and miss to square off that poistion at the right time.
Also, you will hear a lot of skepticism when the market is diving down. However, when the market is significantly moving up everyone becomes optimistic about the fundamentals and the economy. So, even while the sentiment is too negative you would see signs of the chart moving bit up. According to me, if you see in the weekly chart (View Chart), in july 2008, the market was at 4000 levels after which it formed a W-shaped curve. After this W, the market is again at 4000 levels now and moving around it, as it forms a good support. From here, what would trigger a negative move is a strong news. If you've noticed in previous times if the market keeps hovering around the same levels for quite sometime with high liquidity, the sentiment very gradually tends to become more positive and would slowly move the market up till the time there is a negative or positive news. When people have the money idle, they want to make use of it. Technical analysis is after all the different measures of the cumulative force of the crowd behaviour of the people. So, what I believe is, it should be around this level (4000) and would gradually move higher and once it breaches some point around 4600, it should keep moving higher. But, there may be some negative news on the cards we're going to witness. So, I can't firmly believe just with this logic that the market would move up within this month. That's the reason I'd rather play with the Days to Expiry. Also, remember, option writers (sellers) are the ones who make more money than option buyers.
Also, you will hear a lot of skepticism when the market is diving down. However, when the market is significantly moving up everyone becomes optimistic about the fundamentals and the economy. So, even while the sentiment is too negative you would see signs of the chart moving bit up. According to me, if you see in the weekly chart (View Chart), in july 2008, the market was at 4000 levels after which it formed a W-shaped curve. After this W, the market is again at 4000 levels now and moving around it, as it forms a good support. From here, what would trigger a negative move is a strong news. If you've noticed in previous times if the market keeps hovering around the same levels for quite sometime with high liquidity, the sentiment very gradually tends to become more positive and would slowly move the market up till the time there is a negative or positive news. When people have the money idle, they want to make use of it. Technical analysis is after all the different measures of the cumulative force of the crowd behaviour of the people. So, what I believe is, it should be around this level (4000) and would gradually move higher and once it breaches some point around 4600, it should keep moving higher. But, there may be some negative news on the cards we're going to witness. So, I can't firmly believe just with this logic that the market would move up within this month. That's the reason I'd rather play with the Days to Expiry. Also, remember, option writers (sellers) are the ones who make more money than option buyers.
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