The extreme range-bound movement in Nifty over the past couple of sessions has thrown day traders out of job. The trading range — both on overnight and intra-day basis — has become so narrow that it became tough to take a trade that can yield any substantial gain after taking brokerage costs into consideration.

As far as the August series is concerned, in the last two columns we had recommended writing of straddles at strike prices 5,300, 5,500 and 5,200. As on date, the time values in these straddles have come down and now there is a higher risk in keeping these straddles open. So, we would recommend traders to close these straddles as they have already given decent returns. Also, the extreme short-term range-bound movement of Nifty may not last long. From now on a directional move of about 150 points can take place easily either because of a tired bull liquidation or a short squeeze.

For this week, we would suggest investors to buy some put options. One may sell some of the deep out-of-money puts in order to part-finance the cost of buying the put options that are near the money.

For example, an investor may buy a put option at strike price 5,400 for August series as there is a high probability that Nifty will slip below this level over the next few sessions.

This option is now quoting at Rs 61.50. In order to part-finance the buying of this option, the investor may sell two put options at strike price 5,200 for August series, which are now quoting at Rs 20. So, the net cost of the combined trade will be Rs 20. In case Nifty sees a drop, the value of the put option at strike price 5,400 is going to rise faster compared with the price of the put option at strike price 5,200.

For compulsive straddle writers, it’s time of shift to the September series and write a straddle at strike price 5,300. The combined value of this straddle is now at Rs 313, with the call option coming at Rs 228 and the put option at Rs 85. The breakeven point for this straddle will be at 5,000 in the southward direction and 5,600 in the upward direction.