The Nifty could gyrate within a 1000-point range in the coming week, options for April 16 expiry showed at closing Thursday.The closing price of the 9000 straddle call and put at 9000 was Rs 480 a share (75 shares make one contract) that day.
This means the straddle seller doesnt expect the Nifty to expire below 8520 and above 9480 for the week ended April 16.
The range for the market is 8520 -9480.The seller receives premium from the options buyer and that is the maximum she earns.
She sells a straddle in the belief that the market would trade within a range and makes the maximum money if it expires at the level she sold the call and put, 9000 in this case.Every point the Nifty moves above or below that level reduces her profit until the upper breakeven (9480) or lower breakeven (8520) points are reached.
Beyond and below these points, unlimited losses would begin unless she has placed a stop-loss.Market constituents like Hormuz Maloo, director, Afco Investments, said hed like to see the Nifty close conclusively above 9131.7, as this would determine whether the rally would extend beyond Thursdays close of 9112.The 9131.7 level was the April 8 high hit from the low of 7511.10 made on March 24.
After hitting that level, the market closed lower at 8748.75.
On April 9, the market closed above the resistance of 9038.9, which was the high of the same week when 7511.10 was made.
But it closed below the high of 9131.7.Rohit Srivastava, founder, India-Charts, expects 9131.7 to be broken conclusively and that the Nifty would head toward 10000 this month.
Analysts expect factors like US market performance and decision on the lockdown in India to be some of the influencing factors for the market.In the calendar year to date, FIIs have sold shares worth Rs 50,981 crore.
They were cumulatively net short Nifty and Bank Nifty contracts by 17288 contracts.
HNIs and corporate clients have net short index futures by 17511 contracts.
The latter have hedged themselves or are betting on a correction in Nifty, for now.