F&O Radar: Chandan Taparia Recommends Bear Put Spread in Nifty Amid Market Volatility – Motilal Oswal Insights

The Nifty Index opened higher on Tuesday but couldn’t maintain its early gains and dropped sharply. After a quick sell-off in the first hour, the index continued to slide but found some relief near the 25,000 level. It formed a bearish candle on the daily chart and closed with a loss of 70 points, staying just above its 50-day exponential moving average (DEMA).

Chandan Taparia, Senior VP of Equity Derivatives and Technicals at Motilal Oswal, said, “The Nifty needs to stay above the 25,000 mark to see an upward move towards 25,250 and then 25,350 levels, while support can be found at 25,000 and 24,850 zones.”

On the options front, the highest call open interest (OI) is at the 25,200 and 25,100 levels, while the highest put OI is at 25,000 and 24,500. There has been call writing at 25,200 and 25,100, while put writing is seen at 24,500 and 25,050 levels.

According to Taparia, the option data suggests that Nifty could trade within a broader range of 24,500 to 25,500, with an immediate range of 24,700 to 25,200 levels.

Taparia advises traders to take advantage of the market’s bearish mood by using a Bear Put Spread strategy, especially in times of volatility. This strategy benefits from a potential downside move towards the 24,800 zone.

Bear Put Spread Strategy

This is a strategy used when traders expect the price of an asset to fall in the near future. It involves buying and selling put options with the same expiration date but at different strike prices.

In a Bear Put Spread, the trader buys a higher strike price put option, which is in-the-money (ITM), and sells a lower strike price put option, which is out-of-the-money (OTM). This strategy results in a net cost (debit) for the trader, as the cost of the ITM put is offset by the premium received from selling the OTM put.