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Options data holds wider trading range

Put option bases significantly lower than Call OI; All OTM strikes witnessed addition of Call OI; India VIX at 18.46% suggesting caution

Options data holds wider trading range
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Options data holds wider trading range

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The latest options data on NSE is pointing to wider trading range for the week ahead (December 6-10, 2021) as the highest Open Interest (OI) base is at 18,000CE and 17,000PE. The resistance level moved up by 500 points and support level remained at 17,000PE for a consecutive second week.

According to the latest F&O data, despite the marginal decline in the volatility and recovery, Put option bases are significantly lower than the Call bases. The highest Call option base is near 50 lakh shares at 17400 and 17500 strike indicating hurdle at higher levels. However, the highest Put base is at 17000 strike will act as an immediate support. If Nifty sustains above 17,400 level, then the recovery may continue. Hence, Nifty may trade in a broader range of 16800-17400 in the coming week.

Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: "From the derivatives front, Call writers added hefty Open Interest at 17300 & 17400 strikes, while Put writers added marginal Open Interest at 17200 & 17100 strikes."

The 18,000 strike has a maximum Call OI base followed by 17,400/17,600/ 17,500/ 18,100/18,200/18,500 strikes. Further, 17,500/18,000/18,100/17,550 strikes recorded significant build-up of Call OI. All the OTM strikes witnessed the addition of Call OI.

Coming to the Put side, the 17,000 strike recorded highest Put OI followed by 16,000/ 17,200/16,500/16,400 strikes, while moderate addition of Put OI is seen at 16,700/16,600/ 16,400/16,700 strikes. Strikes from 17,000 to 17,400PE recorded offloading of Put OI in a modest way.

"Bulls kept their grip on Indian markets during the week. As Nifty surged above 17,450 mark on the back of short covering. However, once again selling pressure was observed in the later part of the week as Nifty once again dragged down sharply towards its 100-day exponential moving average on daily charts to end the week below 17,200 level. Pressure was seen coming from banking, FMCG, auto and pharma counters," observes Bisht.

For the week ended December 3, 2021, BSE Sensex closed at 57,696.46 points, a net gain of 589.31 points or 1.03 per cent, from the previous week's closing of 57,107.15 points. Registering a rise of 170.25 points or 0.99 per cent, NSE Nifty ended the week at 17,196.70 points from 17,026.45 points a week ago.

Bisht forecasts: "For upcoming week, we believe that markets are likely to trade on a volatile path and selling pressure at higher levels can further keep prices under check as far Nifty is trading below 17400 mark. On the downside, any dip below the 17000 mark will once again likely add further long unwinding which could drag the Nifty towards 16800 levels as well."

According to data from ICICIdirectt.com, the leverage positions in index futures remained on the lower side and despite recent recovery, Nifty futures OI remained near 1.1 crore shares. However, some change of bias is visible from FIIs which have turned net longs both in Index as well as stock futures. Domestic institutions remained significantly short in index and stock futures but retail participants are net long in stock futures.

India VIX rose 2.03 per cent to 18.46 level as on last Friday. Volatility index at 18 level is still on a higher side and suggesting caution. From the sectoral perspective, technology stocks held their ground.

"Implied volatility of Calls closed at 14.56 per cent, while that for Put options closed at 15.19. The Nifty VIX for the week closed at 18.09 per cent. PCR of OI for the week closed at 1.35," remarked Bisht.

In the F&O space, FIIs focused on the stock futures segment as short covering was experienced with the market recovery. FIIs sold Rs2,144-cr index options and bought to the tune of Rs7,195-cr stock futures suggesting some short covering. FIIs also bought index futures worth Rs1,553 crore.

Bank Nifty

NSE's banking index closed the week at 36,197.15 points, a marginal recovery of 171.65 points or 0.47 per cent, from the previous week's closing of 36,025.50 points. Despite underperformance, banking heavyweights have some early signs of covering and one should keep a close watch.

Throughout the November F&O series and early December, Bank Nifty recorded heavy Call writing, due to which the Put-Call ratio slipped towards 0.62. However, it has reverted last week and moved towards 0.92 as the quantum of Call writing has declined and Put writing has started picking up pace, says ICICIdirect.com.

Dasari Sreenivasa Rao
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