The short-term trend bounced from support at 9,450 in late June. Since then, it's been a pretty one-sided trend with successive resistances broken. The Nifty pulling above 10,100 means that 10,000 level is a key support now.
The index moved North in late December 2016 from 7,900 levels. It has now hit an all-time high of 10,115. The length of this current move (in time and magnitude) indicates the next intermediate correction could be severe. The first Fibonacci level is at around 9,250-9,300 and a dip till 8,850-8,890 may occur in the next intermediate downtrend.
Simple trend following systems suggest staying long in the Nifty futures with a stop-loss at about 9,950. The VIX remains low but its risen a little, indicating traders are slightly nervous. Put-call ratios are at overbought zones but not so useful this soon in a new settlement.
The Nifty Bank has also broken out to a new high. It's above 25,000. The August settlement is quite long and a swing till 24,000 or till 26,000 could occur if there are three big trending sessions. A strangle of long August 31, 26,000c (90), long August 31, 24,000p (88) is not quite zero-delta, with the index at 25,100. Either side of this strangle could be hit in the five-week long settlement. This position is relatively cheap. It can be offset with a short August 10, 26,000c (24), short Aug 10 24000p (20).
The August Nifty call chain has peak open interest (OI) at 10,500c and high OI until 11,500c. The August put chain has very high OI at 9,800p, with high OI all the way below, till 9,000p. The Nifty closed at 10,103 on Monday.
A bullspread of long August 10,200c (75) short 10,300c (42) costs 33 and pays a maximum 67. This is 100 points from money - less than 1 per cent away. A bearspread of long August 10,000p (88), short August 9,900p (62) costs 26, pays a maximum of 74 and is also 100 points from money.
The spreads could be combined for a zero-delta long-short strangle position. That would cost 59, with breakevens roughly at 9,940, 10,260. One side is very likely to be hit. A naked straddle - long 10,100c (122), 10,100p (122) costs 244 and has breakevens at 10,344, 9,856. That can be offset with short options as well and of course, it will be hit for sure.