Look at standard positions

ALTERNATIVE AVENUES/ Short-term momentum indicators are mildly negative without being oversold

 

Nifty key stats
	Last  week	Previous  week	Abs.  chg
1-m pre/(dis)	1.60	-11.65	13.25
2-m pre/(dis)	4.25	-10.95	15.20
3-m pre/(dis)	3.60	-9.90	13.50
Futures OI*	726.82	650.90	11.66^
Options OI*	604.75	524.29	15.35^
Put call ratio	0.84	0.83	-
Put vol. indicator	1.20	0.88	-
* In lakh ^ % chg

 Anyway, let's look at standard positions at prevailing prices. A conventional bull-spread with a long 2070c (13.9) versus a short 2080c (11.15) costs just 2.75 and it could pay a maximum of 7.75. That's a tempting risk-return ratio despite the short time to expiry.  A wider bull-spread such as long 2070c (13.9) versus short 2100c (6.65) costs 7.75 and this could pay 22.25. So the risk-reward ratio remains good even for these wider position.  A conventional bear-spread such as long 2040p (14.35) versus short 2030p (8.8) costs 5.55 and it would pay only 4.45. So the risk-return ratio is actually adverse for conventional bear-spreads. A wider bear-spread such as a long 2040p (14.35) versus 2000p (4.55) costs 9.9 and pays 29.2. But this will be difficult to create since counter-parties for a short 2000p will be tough to find.  If we wish to create a combination of straddles and strangles, this is an important point. It restricts our strategies. A short straddle at 2050 with short 2050c (23.95) and short 2050p (16.4) brings in around 41.35 and this is profitable if the market doesn't break 2010-2090.  A long strangle with long 2000p (4.55) and long 2100c (6.65) costs 11.20. A combination of these positions would bring in around 30 but the function remains profitable only between 2020-2080.  We don't look at the next settlement's possibilities because of lack of liquidity in the option chain. But the Budget is a special case and a look at the March premiums gives us some indication of how much movement is expected. The March 2050c (70.90) plus the March 2050p (63.4) costs a total of 134.  This means the market is braced for a move anywhere between 1920-2185 since that is the equilibrium position for this straddle as shown in March Nifty Straddle.  I am not suggesting that this position is created but this options-market-expectation gels with a pure technical assessment that the market could move anywhere between 1850-2300 once the trading range is broken.  Stock futures and options
In the stock market, few counters are likely to provide a hedge if the Budget creates a bearish sentiment. In the select group of pivotals available in the F&O segment, there are even fewer. We cannot hedge the Budget! 

Stocks with highest change in options OI
Stocks	% Change	PCR
Mastek	122.22	0.20
HLL	68.50	0.41
M&M	66.14	0.22
ICICI Bank	54.06	0.10
Satyam	43.46	0.57
Grasim	-16.67	0.05
Dr Reddy