Punters bet on 21\,230-21\,970 range for Bank Nifty post policy today

Punters on Bank Nifty have sold significant amounts of at-the-money call and put at 21600 ahead of the RBI policy. The value of this 21600 straddle assumes the Bank Nifty could move in a 3.4% range from 21,230-21,970 today when the options expire.

Expectations are dependent on whether there is a one-time loan restructuring, rate cut or moratorium extension. The Bank Nifty is the weak link and has lagged the Nifty index in the recent rally from March lows. The Bank Nifty is well below the 38.2% retracement of its correction from a record high of 32613 in December to the low of 16116 in March while Nifty has exceeded its 200-day moving average.

The option writers are betting on a 3.4% move but if the index breaks this range post the policy, they would lose heavily. They get a cumulative premium of Rs 370 a share (25 shares make one lot).