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Options data holds wider trading range

High futures premium holds caution amid volatility
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High futures premium holds caution amid volatility

Highlights

Nifty VIX at $25.34 may remain volatile; Nifty rollover at 77.28% against 3-month average of 77.36%

With resistance level moving up by 1,000 points, while support level moved down by 400 points, the trading range for Nifty is getting wider amid volatility, according to the latest options data. The highest Call Open Interest (OI) addition is at 16,000 CE after the trading hours on Friday from 15,000 CE in the previous week.

The highest Put OI build-up is seen at13,600 PE as against previous 14,000 PE. The Open Interest in the NSE Nifty declined from last month. The February series began with OI close to 9.6 million against 11.8 million shares seen in the January F&O series.

However, the roll spread has come under pressure as expected and Nifty February futures closed with just 30 points premium indicating some liquidation ahead of the Budget-2021.Ahead of the Union Budget, no major OI concentration is visible in Calls or Puts.

As per the data from ICICI Direct.com, the Put base for the February series is placed at ITM 14,000 strike followed by 13,500 strike. On the higher side, immediate Call concentration can be seen at 14,500 strike for the monthly expiry.

Moreover, volatility has remained elevated near 24 levels throughout the week as selling pressure was experienced in emerging markets. The 16,000 strike has the highest concentration of Call OI followed by 15,000/14,000/15,500/15,100 strikes.

The highest concentration of Put OI is at 16,000 strike followed by 15,000 strike, 15,500/15,100 strikes. Coming to the Put side, the 13,800 strike has the highest Put OI build-up followed by13,600/13,500/13,200 strikes.

Most index heavyweights recorded relatively low rollover as closure of positions was seen across the board. Analysts predict that fresh leverage positions would be formed post-Budget, which provides a further directional move. However, select auto and pharma stocks are witnessing continued short additions.

"Indian markets tanked down sharply in the week gone by as bears remained on front foot and dominated the Indian markets as Nifty closed below crucial support level of 13,800 with a loss of more than five per cent week on week.

Traders were also seen locking profits at higher level before the outcome of Union Budget 2021. However, Bank Nifty somehow managed to limit huge losses and closed the week with negative returns of nearly two per cent," observed Bisht.

For the week ended January 22, 2021, BSE Sensex closed at 46,285.77 points, a net fall of 2,592.77 points or 5.30 per cent, as against 48,878.54points. NSE Nifty declined by 737.30 points or 5.13 per cent and closed at 13,634.60 points from 14,371.90 points.

"In coming week markets are expected to remain volatile as a tug of war among bulls and bears likely to continue. However, the 13,400-13,300 zone for Nifty will be a key support zone from technical front," forecasts Bisht.

The NSE's broad-based index Nifty witnessed a subdued settlement as investors resorted to book profits and it hammered down the index almost 1,000 points from the high. Further, FIIs turned sellers in the last few sessions and it created an extended selling pressure on the bourses. However, FIIs have bought more than Rs 23,000 crore in January till now, according to ICICI Direct.com.

After three consecutive blockbuster derivatives expiries for October, November and December, the NSE Nifty witnessed a roller-coaster ride in January futures and options (F&O) series. It touched a lifetime high of 14,753 levels and thereon saw a sharp decline, registering a series-on-series loss of 1.37 per cent, according to data onSharekhan.com.

Bank Nifty

The NSE's banking index Bank Nifty closed at 30,565.50 points, a net loss of 601.75 points or 1.93 per cent from 31,167.25 points. According to ICICI Direct.com, the overall bias for the Bank Nifty remains positive due to no major Call writing blocks, lower leverage positions and Put writing in private banks OTM strike.

If Union Budget 2021 doesn't disappoint then fresh buying interest could emerge in Bank Nifty and it could move towards its sizable Call base of 32,000 strike. Intraday short covering last Friday helped the index test its weekly highest Call base. Analysts forecast that a close above 31,000 would take Bank Nifty further high levels.

For the main expiry, Call OI additions are visible in 32,000 strike followed by 32,000 points, whereas major Put OI concentration is placed at 29,000 strike, which remains the strong support area.

While on the other hand Bank Nifty also after reaching a lifetime high at around 32,842, it showed a one way decline, registering a series-on-series loss of around 3.02 per cent with OI increased by 22 per cent, indicating a build-up of shorts in the index.

However, Rollover in the Bank Nifty was bit on the lower side at 74.55 per cent compared to three-month average of 78.13 per cent indicating some of the shorts are left out.

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