F&O Radar: Bull Condor Strategy Set to Capture Nifty’s Positive Momentum – What You Need to Know

Nifty ended the week positively, after a strong rally at the end of June. Although the first week of July had quieter sessions with some profit-taking, we believe there’s more upside ahead despite these corrections.

“Nifty found support at 24,230, which is the Fibonacci Extension level from the recent move. The next resistance is at the 1.618 level, the golden ratio. Downside support is solid at 24,230 and 24,180, which bulls need to defend. We have the Union Budget coming up this month, and quarterly earnings are also due soon,” said Shrey Jain, Founder & CEO of SAS Online.

In the short term, the outlook remains bullish for two main reasons. Firstly, market breadth has improved over the past week, with the number of stocks trading above their 20-day moving average rising by 20%. Now, 78% of stocks are above this level. Secondly, the RSI (Relative Strength Index) has crossed above 70 this week, indicating momentum, and the 4-hour charts show the ADX (Average Directional Index) crossing above 25, with positive DI gaining strength, added Jain.

Looking at the Open Interest (OI) for next week, there’s a concentration of Call options at the 24,200 strike price, while the highest Put options concentration is at 24,800. The ATM (At-the-Money) Implied Volatility (IV) continues to fall, now at 9.46, showing low premiums.

In this scenario, Shrey Jain suggests using a Bull Condor Spread to benefit from the positive market momentum.

Bull Condor Spread

A Bull Condor Spread is an options trading strategy that aims to profit if the price of a security rises within a predicted range. It’s similar to the Bull Butterfly Spread but requires less precision. This advanced strategy involves four different transactions to create a spread where you pay a debit.

Below is the payoff graph for the strategy:

Graph depicting the potential gains and losses from the Bull Condor Spread.