Predicting NIFTY and BANKNIFTY range for the day/week/month

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INTRODUCTION

This blog outlines the ways of predicting the NIFTY and BANKNIFTY range for a day/week/month. There are multiple ways of doing it; a) By looking into Open Interest chart, b) By looking into ATM premiums, c) By looking into VIX.

All the three are described below. Please note: These methods only gives a rough idea about the range and be aware that markets do depend on lot of other external factors (like some global news etc).

 

OPEN INTEREST CHART (OI CHART)

By looking into OI chart we can rough predict range of NIFTY and BANKNIFTY for a particular week.

Look for highest OI on put and call side and that forms the support and resistance for a given week. It is illustrated in the below example.

As highlighted in the above picture, NIFTY has highest OI at 12000 and 12500 strikes. So it is safe to assume that weekly range for the current week (Example here is for 12NOV2020 expiry) will be >12000 and <12500.

ATM PREMIUM FOR CALL AND PUT

Another way of predicting is by looking into the OI chart we can roughly predict the range of NIFTY and BANKNIFTY for a particular week. 

Look for the premium of ATM strikes on call and put side, add them and minus (or add for upper range) the sum from ATM strike on either side. This will give the range for the week. It is illustrated in the below example.

 

 From the above NIFTY chart, the sum of ATM strikes is 113+138 = ~250 points. Now if we deduct 250 (or add for upper range) from the ATM strike on call and put side, the NIFTY range would be; 

Lower range = 12250 - 250 = 12000

Upper range = 12250 + 250 = 12500

 

 INDIA VIX

Using INDIA VIX value we can arrive at the daily, weekly and montly range of NIFTY or BANKNIFTY. INDIA VIX value can be found here (link).

Example to calculate NIFTY range from INDIA VIX: (As of 12 NOV 2020 expiry)

1) INDIA VIX = 20.49

2) NIFTY SPOT = 12250

3) Formula = (VIX/Sqrt(T))%  -  [T = 365/N and N= No of days, For Week N = 7 and for Day N=365 and for Month N=31]

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