Options data points to wider trading range

The resistance level moved up by 1,000 points to 18,000CE and support level eased by 600 points to 17,000PE giving more room for wide-range trading for the week ahead. Derivatives analysts feel that NSE Nifty is in consolidation phase, hence there may not be further continuous upward trajectory.

The 18,000CE has highest Call OI followed by 17,500/ 17,600/18,100/17,900/17,400/17,800 strikes, while 17,600/17,500/18,000/18,100/18,200/17,800 strikes recorded hefty build-up of Call OI.

Coming to the Put side, maximum Put OI is seen at 17,000PE followed by 16,500/17,200/ 17,300/17,100/16,000 strikes. And 17,200/17,100/16,800/16,500/16,000 strikes witnessed reasonable addition of Put OI.

In the options space, Nifty recorded continued Put writing at ATM and OTM strikes. According to NSE data, at17400 strike, Put holding the major Open Interest. Call writers continue to remain under pressure, while the highest Call base remained at the 17500 strike. Closure among these options is likely to take the Nifty towards 17800. On downsides, it may remain positive with stop loss near 17200 level.

Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: "In Nifty, the highest Call Open Interest is at 17,500 strike, whereas on Put side, Call OI is at 17,000 strike. On the daily chart, Nifty and Bank Nifty oscillators are moving towards the overbought zone."

Nifty futures Open Interest remained low near one crore shares. Marginal closure of long positions was seen as the Nifty approached 17,500 level, but any major short additions were not seen. Also, since most index heavyweights have already announced their results, the focus may move towards the midcap space in coming sessions.

"On Friday, RBI announced a further hike in key rates, which had already been discounted in the market. On the weekly chart, Nifty and Bank Nifty closed in green. Nifty is trading above 17,000 psychological level whereas Bank Nifty is hovering around 38,000 level," added Bisht. For the week ended August 5, 2022, BSE Sensex closed at 58,387.93 points, a recovery of 817.68 points or 1.42 per cent, from the previous week's closing of 57,570.25 points. Registering a continuous rebound of 239.25 points or 1.39 per cent, NSE Nifty ended the week at 17,397.50 points from 17,158.25 points a week ago. Bisht forecasts: "In coming session, Nifty is likely to trade in the zone of 1720017700 levels whereas Bank Nifty may trade in the zone of 37500-38500 levels. Buy on dip strategies can be followed this week as rollover for August series is positive."

Volatility index India VIX fell 1.78 per cent to 18.92 level. Closure among Call writers and escalation in geo-political tension can be attributed for increase in Implied Volatility (IV) during the last week. However, volatility was settling down and may not move beyond 20 level in coming sessions.

"Implied Volatility of Calls closed at 17.09 per cent, while that for Put options closed at 18.70 per cent. The Nifty VIX for the week closed at 19.26 per cent. PCR of OI for the week closed at 1.37," remarked Bisht.

FIIs in the F&O space marginally liquidated last week as they cut down their long positions due to geo-political issues. However, FIIs remained net longs in both index and stock futures. FIIs sold near Rs1,200-crore worth index futures and bought Rs580-cr stock futures. Net positions in stock futures remained almost unchanged during the week, as per ICICIdirect.com.

Bank Nifty

NSE's banking index closed the week at 37,920.60 points, a further recovery of 429.20 points or 1.14 per cent, from the previous week's closing of 37,491.40 points. Highest Call and Put Open Interest is at 38000 for both options. This level will play an important role in Bank Nifty.

On the option side, Put writing position at 37500 strike remained intact, which is likely to act as an intermediate support whereas highest Put base remained intact at 37000 level. It's a buy on dips market. Post such a sharp up move, a breather in the index seems possible. However, dips should be bought into till the index holds the 37000 level.

Highest Call base for the current week is placed at the 38,000 strike and the index is hovering around these levels. Closure in the OI should provide the required ignition to the index. Then the index would head towards 39000 level.