Derivatives Trading Strategy for 8th Aug, 2025:
Derivative trading in the Indian stock market offers opportunities for traders to capitalize on price movements in indices like Nifty and Bank Nifty. With the market showing signs of cautious optimism on August 7, 2025, driven by geopolitical developments and domestic buying, this article provides a detailed market prediction and derivative trading strategy for August 8, 2025. By analyzing market participant data, option chain details, and cash market activity, we aim to equip traders with actionable insights for informed decision-making in the Indian stock market.
Today's Market Movement and FII Cash Activity
On August 7, 2025, the Indian stock market staged a modest recovery after a volatile session. The Nifty 50 index closed at 24,596.15, up 0.09% from its opening at 24,464.20, with an intraday low of 24,344.95 and a high of 24,634.20. The Bank Nifty index outperformed slightly, gaining 0.20% to close at 55,521.15, with a high of 55,614.80 and a low of 54,973.95. The Sensex also rose by 0.19%, ending at 80,623.26 after touching a high of 80,700.03.
In the cash market, Domestic Institutional Investors (DIIs) were net buyers, purchasing shares worth ₹10,760.13 crore, signaling strong domestic confidence. Conversely, Foreign Institutional Investors (FIIs) sold shares worth ₹5,214.04 crore, indicating a cautious stance. Despite FII selling, the net buying activity in the cash market supported the day’s recovery.
Analysis of Market Participant Data
🧑💼 Client
- Future Index Long: 1,270
- Future Index Short: 3,666
- Option Call Long: 1,499,297
- Option Call Short: 1,437,221
- Option Put Long: 592,900
- Option Put Short: 679,344
- Total Long Contracts: 2,057,509
- Total Short Contracts: 2,057,509
🏦 DII (Domestic Institutional Investors)
- Future Index Long: 1,096
- Future Index Short: 1,993
- Option Call Long: 0
- Option Call Short: 0
- Option Put Long: 4,251
- Option Put Short: 0
- Total Long Contracts: 379
- Total Short Contracts: 56,662
🌐 FII (Foreign Institutional Investors)
- Future Index Long: 667
- Future Index Short: 6,835
- Option Call Long: 161,180
- Option Call Short: 168,266
- Option Put Long: 115,579
- Option Put Short: 95,546
- Total Long Contracts: 240,091
- Total Short Contracts: 234,129
👨💼 PRO (Proprietary Traders)
- Future Index Long: 45
- Future Index Short: 1,902
- Option Call Long: 545,626
- Option Call Short: 600,617
- Option Put Long: 341,432
- Option Put Short: 279,271
- Total Long Contracts: 818,063
- Total Short Contracts: 823,635
🧮 TOTAL (All Participants)
- Future Index Long: 3,078
- Future Index Short: 3,078
- Option Call Long: 2,206,104
- Option Call Short: 2,206,104
- Option Put Long: 1,054,162
- Option Put Short: 1,054,162
- Total Long Contracts: 3,055,611
- Total Short Contracts: 3,055,61
- FII Positions: FIIs hold significantly more short positions (6,835) than long positions (667) in index futures, suggesting a bearish outlook on the broader market. In options, FIIs have a net short position in calls (168,266 short vs. 161,180 long), indicating expectations of limited upside. Their put positions show more long contracts (115,579) than short (95,546), possibly reflecting hedging against potential declines.
- DII Positions: DIIs have minimal activity in index options but are net buyers in the cash market, counterbalancing FII selling.
- Implications: The bearish tilt in FII index futures positions could cap market upside, but their long positions in stock futures (26,975 long vs. 13,763 short) suggest selective optimism in specific sectors.
This derivative market data indicates a cautious market sentiment, with FIIs preparing for potential volatility while DIIs provide stability through cash market buying.
Option Chain Analysis
The option chain data for Nifty and Bank Nifty offers clues about potential support and resistance levels, crucial for derivative trading strategies.
Nifty Option Chain
The Nifty option chain for the present expiry shows:
Strike | CE OI | CE OI Change | PE OI | PE OI Change | PCR Change % |
|---|---|---|---|---|---|
25,100 | 36,416 | 14,730 | 2,716 | 708 | -14,022 |
25,000 | 71,200 | 38,428 | 11,095 | 4,923 | -33,505 |
24,900 | 30,601 | 13,230 | 6,734 | 2,348 | -10,882 |
24,800 | 40,969 | 15,937 | 9,536 | 2,626 | -13,311 |
24,700 | 38,300 | 11,773 | 18,830 | 2,179 | -9,594 |
24,600 | 41,013 | 15,352 | 39,335 | 17,635 | 2,283 |
24,500 | 34,156 | 24,952 | 61,689 | 40,026 | 15,074 |
24,400 | 14,148 | 11,235 | 47,850 | 32,428 | 21,193 |
- Key Observations: The highest put open interest (OI) is at 24,500 (61,689), indicating strong support. Significant call OI is at 24,600 (41,013) and 25,000 (71,200), suggesting resistance. The Put-Call Ratio (PCR) for the present expiry is approximately 0.97, calculated as total PE OI (380,452) divided by CE OI (390,829), indicating neutral sentiment.
- Support and Resistance: The 24,500 strike is a key support due to high put OI, while 24,600 and 24,700 are resistance levels due to call OI buildup.
Bank Nifty Option Chain
The Bank Nifty option chain shows:
Strike | CE OI | CE OI Change | PE OI | PE OI Change |
|---|---|---|---|---|
56,000 | 35,982 | 1,304 | 25,776 | -1,689 |
55,500 | 20,839 | -866 | 22,747 | 525 |
55,000 | 8,892 | 1,831 | 26,343 | -88 |
54,000 | 4,591 | -520 | 4,710 | -616 |
- Key Observations: High put OI at 55,000 (26,343) and 56,000 (25,776) suggests support around 55,000. High call OI at 56,000 (35,982) indicates resistance. The PCR is 0.844, slightly bearish, with put OI increasing and call OI decreasing slightly.
- Support and Resistance: Support is likely at 55,000, with resistance at 56,000.
Geopolitical Influences
The market outlook is significantly influenced by the upcoming meeting between US President Donald Trump and Russian President Vladimir Putin, as reported by Reuters. This meeting aims to discuss a potential ceasefire in Ukraine, which could ease geopolitical tensions and enhance market sentiment. However, Trump's announcement of a 25% tariff on Indian goods, effective August 28, 2025, due to India's imports of Russian oil, introduces uncertainty. A positive outcome could sustain market momentum, while setbacks may lead to increased volatility.
Derivative Trading Strategy for August 8, 2025
Based on the derivative market analysis and market prediction, here are the recommended strategies for August 8, 2025:
Nifty Trading Strategy
- Bullish Strategy: If Nifty opens above 24,600 and sustains, traders can buy Nifty futures or 24,600 call options. Set a target of 24,700 and a stop loss at 24,550. This strategy leverages the potential for continued upside if the market builds on August 7’s recovery.
- Bearish Strategy: If Nifty opens below 24,600 and shows weakness, buy 24,600 put options or short futures. Target 24,500, with a stop loss at 24,650. This accounts for potential downside if FII selling persists.
- Neutral Strategy: If Nifty trades between 24,500 and 24,600, consider a short straddle by selling both 24,600 call and put options. This strategy benefits from low volatility, given the high OI at these levels, but requires careful risk management due to unlimited loss potential.
Bank Nifty Trading Strategy
- Bullish Strategy: If Bank Nifty opens above 55,521 and holds, buy futures or 55,500 call options. Target 56,000, with a stop loss at 55,300, capitalizing on potential strength in banking stocks.
- Bearish Strategy: If Bank Nifty opens below 55,521 and weakens, buy 55,500 put options or short futures. Target 55,000, with a stop loss at 55,700, considering the bearish PCR.
- Neutral Strategy: If Bank Nifty remains between 55,000 and 56,000, an iron condor strategy (selling out-of-the-money call and put options while buying further out-of-the-money options) can profit from range-bound movement.
Risk Management
- Stop Losses: Always use stop losses to limit losses, as derivative trading is inherently risky.
- Position Sizing: Avoid over-leveraging, as volatility from geopolitical events could lead to sharp price swings.
- Monitor Global Cues: Watch overnight US and Asian market performances, as they can influence Indian indices at the opening.
Conclusion
The Indian stock market on August 8, 2025, is likely to be influenced by a mix of domestic and global factors. The strong DII buying and the market’s recovery on August 7 suggest underlying resilience, but FIIs’ bearish positions in index futures and the uncertainty around US tariffs warrant caution. The option chain data highlights key levels to watch, with Nifty support at 24,500 and resistance at 24,600–24,700, and Bank Nifty support at 55,000 and resistance at 56,000. Traders should remain vigilant, using the outlined derivative trading strategies while staying updated on geopolitical developments.
Disclaimer
This article is for educational purposes only and does not constitute a buy or sell recommendation. Derivative trading involves significant risks, and investors should consult with financial advisors before making trading decisions. Past performance is not indicative of future results.