Derivatives Outlook: Call OI offloading at deep OTM/ITM strikes

Reflecting a shrinking trading range for the week ahead, the resistance level fell by 400 points to 22,600CE and the support level moved up by 300 points to 22,300PE.

The 22,600CE has highest Call OI followed by 22,300/ 22,500/ 22,400/ 22,700/ 23,000/ 22,200 strikes, while 22,300/ 22,350/ 22,600/ 22,70022,400 strikes recorded heavy build-up of Call OI. OI offloading is visible at deep OTM/ITM strikes in Call options.

Coming to the Put side, maximum Put OI is seen at 22,300PE followed by 22,000/ 22,400/ 21,700/ 21,800/ 22,500 strikes. Further, 22,300/22,350/ 22,400/ 22,450/ 22,250/ 22,200 strikes witnessed significant addition of Put OI. Fall in Put OI is seen at deep OTM strikes in the 22,150-21,450 range.

Nifty regained 22,000 mark after hitting 21,700 low last week in the wake of major volatility across the globe. Rate cut by the Swiss central bank infused positive bias into risk assets. Indian indices also recovered sharply from lows. Broader markets have recovered sharply from lows to close the week with gains of more than one per cent. Nifty surpassed the hurdle of series VWAP of 22,200 in the shortened settlement week. Aggressive longs should be avoided till Nifty is not able to sustain above this level.

As per ICICIdirect.com, significant Put writing is visible at ATM and OTM strikes in the recent up move with highest Put base placed at 22,000 strike. While Nifty has managed to close above 22,000 level for the last few weeks despite high volatility, a move below these levels may trigger another round of weakness in the market.