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Options data points to wider trading range

Strong build-up of OI holds positive bias
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Strong build-up of OI holds positive bias

Highlights

The futures and options (F&O) data points to wider trading range for the week ahead as resistance and support levels extended by 500 points each when...

The futures and options (F&O) data points to wider trading range for the week ahead as resistance and support levels extended by 500 points each when compared to the previous week. Highest Call OI build-up is at 15,500 strike after the trading hours on Friday (April 9) from 15,000 points in the previous week. During the period, the highest Put OI moved to 13,500 strike from 14,000 points.

The highest Call OI is at 15,500 strike, which also recorded maximum addition of Call OI, followed by 15,000/ 15,200/ 15,300/ 15,100/ 14,900 strikes. Other strikes 15,000/15,100/ 15,300/15,400 witnessed reasonable build-up of Call OI.

Coming to Put side, the 13,500 strike recorded highest Put OI followed by 14,500/ 14,600/14,000/ 13,700 strikes witnessed active addition of Put OI. Barring 15,000 and 14,900 strikes, remaining strikes added Put OI.

Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: "From derivatives front, Call writers were seen adding hefty Open Interest at 15,000 strike and this should act as a strong hurdle for Nifty going forward. On downside, 14700 and 14500 levels are likely to provide support to the index."

According to ICICI Direct.com, the NSE Nifty registered above average additions in ATM Straddle of (14,800 and 14,900 Call & Put) for the coming week. The combined premium for this straddle is near 250 whereas IVs remained subdued. Nifty may consolidate in coming trading sessions with strong support for the week at 14,500 and resistance at 15,000 points.

"Indian markets once again struggled to hold on to its gains as Nifty and Bank Nifty both the indices ended the week on a negative note. Nifty indices ended the week below the 14,850 mark, while leading banking names like HDFC Bank and Axis Bank dragged the Bank Nifty below 32,500 level," added Bisht.

The domestic stock market recorded a volatile trading last week as Nifty attempted to overcome the hurdle of 14,950-15,000 points.

The banking stocks suffered the most on the Dalal Street. Despite a loss of 0.20 per cent in the Nifty, other indices saw significant movement. Mid-cap and small-cap indices moved up 1.5 per cent and 3.2 per cent respectively.

For the week ended April 9, 2021, BSE Sensex closed at 49,591.32 points, a net fall of 438.51 points or 0.87 per cent, as against 50,029.83 points. NSE Nifty too declined marginally by 32.05 points or 0.21 per cent and closed at 14,834.85 points from 14,867.35 points.

"The Implied Volatility (IV) of Calls closed at 19.37 per cent, while that for Put options, it closed at 20.58 per cent. The Nifty VIX for the week closed at 20.31 per cent. Put-Call ratio of OI for the week closed at 1.79 and it indicates more Put writing than Calls," added Bisht.

In the F&O space, FII action was primarily seen in the stock futures and index options segment. FIIs were net sellers in the index futures segment worth Rs 35 crore and they sold to the tune of Rs2,176crore in the stock futures segment, while FIIs bought index options worth Rs11,422 crore.

Bank Nifty

The NSE's banking index Bank Nifty closed at 32,448.05 points, a net loss of 1,409.95 points or 4.16 per cent from 33,858 points.

Bisht forecasts: "From technical front, Bank Nifty is trading near its crucial support level of 32,150 points, which is placed at its 100-day exponential moving average. In coming sessions, if Bank Nifty manages to give any decisive move below that then further decline in prices can be observed. Till then we can expect range bound trade in markets with sector- specific moves."

As per the ICICI Direct.com data, IVs remained muted near the 20 per cent mark. Bank Nifty was witnessing closure in OI, which moved to an almost two-year high for the April series and it's indicating a positive for Bank Nifty.

Derivatives analysts predict stock-specific trading for next week, while short covering may pick up pace once the Bank Nifty manages to close above 33,000 points, which has a sizable Call base.

The current price ratio of the Bank Nifty-Nifty declined marginally to 2.28 levels. No major outperformance will take place in the Bank Nifty during the week. It is most likely to consolidate in a broader range.

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