Skip to main content

BANK NIFTY - NIFTY RATIO PLAY



Sometimes, in unfavorable circumstances it becomes bit difficult to take a directional view on entire market or on a particular asset. But in financial markets we have seamless opportunities even at the times when your systems are not able to take a directional view on an asset or when fundamental and technical are not streamlined.

Ratio trading is one of those opportunities. In past we suggested a ratio trade in gold and silver while gold silver ratio was at 120 and today this ratio stands at 76. Means people who traded this opportunity could bought 120 kg of silver by selling 1kg gold and now they can buy 1kg of gold just by selling 77 kg silver means this opportunity has earned you 43kg silver.

Today again I am back with my analysis on BANK NIFTY and NIFTY ratio. Current Bank nifty- Nifty ratio stands at 1.94. Areas of 1.90 has served as good support for this ratio since 2012. However, this ratio has hit 1.62 during 2013 but was not able to spend much time in that territory and then this ratio rallied to 2.64 in May 2019.

At this stage while things are contradictory and fundamentals are suggesting a pessimistic view on entire economy it might be very risky to take a directional view. But yes, sometimes riskless opportunities exist and current situation seems like that only.

As per historical data of this Bank nifty and nifty ratio right now one can execute long positions in Nifty Bank and short position in Nifty 50. Currently this ratio stands at 1.94 thus one can buy 3 lots of BANK NIFTY and sell 2 lot of NIFTY 50. Our objective for this trade is to get benefit from increase in this ratio and our potential target of this ratio is 2.25 and 2.45 in coming months.

At this stage we assume that market is not going to hold this ratio at 1.94 for longer period of time and this ratio will get back to 2.25 or 2.45 in next 2-3 months. Any thing can happen either NIFTY might witness some decline or BANK NIFTY can witness some recovery but by taking this trade we can make money from both scenarios.

In order to protect risk one can, consider 1.90 as stop loss for this ratio trade and as soon as this ratio starts holding below 1.90 one can exit from this trade or options can be used to protect this trade if needed.

Dear readers this blog is intended to spread knowledge about trading and purely for educational purpose read the disclaimer before executing any trade we will not be responsible for any kind of profit or loss made in trades.

We offer a wide range of courses in financial market if you want to learn hedging and option writing you can join our Options Master class in which you will learn everything about options. For more details about our learning program you can fill out the form given in Contact me section and our team will get in touch with you.

For continues updates about market you can join us on our social media handles.

 


Labels:

Comments

Post a Comment

Popular posts from this blog

LIC Housing Finance; time for bulls?

  LIC HOUSING FINANCE settled at 321.90 up by 5.78% on Tuesday. Stock had been staying in a consolidation phase that took shape of an ascending triangle and in today’s session it broke through the resistance line of this triangle consolidation and settled well above key resistance of 312 suggesting dominance of bulls. Stock has been staying above its 9 days SMA on daily chart keeping a short-term bullish trend in picture. Stochastic is now approaching overbought territory along with bullish cross above its signal line suggesting a strong bullish momentum. MACD has been staying in positive territory and now its parting upward from its signal line suggesting development of fresh bullish momentum. Direction and momentum are two important components for any chart to anticipate future price movement and current trend and momentum on chart provided above is suggesting bullishness. Breakout of triangle pattern can be used to determine potential destination for current move and if th...
Post a Comment
Read more

Will Exhaustion Gap Halt the Down Trend in Nifty?

In this video we have explained what NIFTY is likely to do in next few sessions. 
Post a Comment
Read more

Nifty Options Weekly Expiry; MAX PAIN stands at 13400

#NIFTY #INDEX currently trading at 13438, down by 90 from previous close. Today index has opened gap down and taken out the low placed yesterday at 13449 triggering primary weakness in market for the day. Immediate support is now placed at 13390, retest to this level can’t be ruled out but stability below 13390 will result in to further weakness and then attempt towards 13350-13310 zones can’t be ruled out. Key support will be at 13300 and further stability below that level will bring more weakness. Resistance is now placed at day high which stands at 13488, any sustained move (Less likely) above that level will bring some relief to bulls and then attempt towards 13540-13590 can be seen.  On #option_chain heavy #call_writing is being done at 13500-13600 strikes where as short covering is visible in 13450 and 13500 puts whereas longs build up seen in 13400 puts with high volume. Based on current #OI position level of #option_pain stands at 13400 thus based on current data at 10:52AM...
Post a Comment
Read more