Nifty future has been trading in range of 200 points from starting of F&O series. In this article I will demonstrate how can a trader find out this range using a very simple method. You will need to find out nifty put which has maximum open interest here is the link. OK whats next, next thing is to get the nifty call option having maximum open interest its link is here. At this point of time you will have both call options and put option which has highest amount of open interest. These call and put option strike price will correspond to near term range for nifty future. These two levels can be used as support and resistance.
I will explain how:
Resistance Level: Nifty call option having maximum open interest will be a resistance level, so if nifty future approaches this level you must initiate short position.
Support Level: Nifty put option which has highest open interest should be a support level and any time if nifty future manages to trade near this level we must long nifty future at that time.
From above image, we can easily conclude that nifty 5200 put option has highest open interest and nifty 5400 call option has maximum open interest. So near term range for nifty future is now 5200 – 5400, as range is just 200 points so a sideways move is expected in nifty future. Unless nifty future breaks this range we will see range bound market.
Right now I am working on a small program which will automatically tell you which nifty option has maximum open interest. Once I complete, it will be made available here for free. Here is the excel based application that I have successfully build, here is link. Share your valuable comments. Keep on visiting my blog, for daily updates join us on Facebook and Twitter.