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F&O data signals narrowing options band

F&O data signals narrowing options band
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F&O data signals narrowing options band

Highlights

Options data points to lowering resistance level, while the support level remained at previous week’s 11,000 points for NSE Nifty

Options data points to lowering resistance level, while the support level remained at previous week's 11,000 points for NSE Nifty. The resistance level for previous week ended August 14 was 11,300 strike. Highest Open Interest (OI) buildup is seen at 11,500CE and 11,000PE strikes. Analysts predict that the NSE Nifty may continue its positive bias in the settlement week as well with support near 11,200 points.

Dhirender Singh Bisht, senior research analyst (derivatives), SMC Global Securities, said: "From derivatives front, Call writers at 11,300 strike triggered short covering, while Put writers added hefty Open Interest at same with nearly 31 lakh shares. On higher side, now 11,500 strike hold with maximum Open Interest in calls, which should act as immediate hurdle for Nifty."

The 11,500 strike has highest Call OI of 36.95 lakh contracts followed by 11,600 strike, which has maximum Call OI addition of 6.91 lakh contracts, with 27.02 lakh contracts, 11700 strike, which witnessed Call OI buildup of 6.20 lakh contracts, with 26.20 lakh contracts and 11,400 strike with 25.30 lakh contracts.

Coming to Put side, the 11,000 strike recorded highest Put OI of 36.61 lakh contracts, 11200 strike with 29.25 lakh contracts and 11300 strike with 27.89 lakh contracts. The 11,300 strike witnessed maximum Put OI addition of 9.93 lakh contracts. 11,200/11,400 strikes recorded reasonable Put OI buildup.

"After consolidating in range of 11,100 to 11,350 from past few sessions, Nifty indices once again continued its positive momentum and tested 11,400 mark as bulls took the charge, while getting support from private banks, auto and cement stocks," added Bisht.

For the week ended August 21, 2020, BSE Sensex closed at 38,434.72, a marginal net gain of 557.38 points or 1.47 per cent, from the previous close of 37,877.34 points. Similarly, NSE Nifty too gained by 193.2 points or 1.72 percent, and closed the week at 11,371.60 points as against last week's 11,178.40 level.

Bisht forecasts: "From technical front, Bank Nifty is facing strong hurdle in zone of 22,450 to 22,550 levels, above which follow up buying can be seen in the index, which will support next up leg into Nifty as well towards 11,500 levels in coming sessions."

The highest Put for the series was placed at 11,000 strike and is unlikely to be tested. Moreover, gradual build up of positions was seen at 11200 Put strike, which is an immediate and important support for Nifty for the coming week. Moreover, the VWAP at 11,220 should be an immediate support. On the higher side, Call base at 11500 strike should act as immediate hurdle.

The Volatility Index (VIX) remained subdued throughout the week and is hovering just above 20. Considering settlement week, a round of upside in volatility can't be ruled out.

However, the positive bias should be maintained till it does not move above 23 levels. The Nifty may face a hurdle around 11,500 as India VIX is consistently falling. It is leading to the rise in gratification among the market participants.

Furthermore, the US dollar is reverting from near two-year lows and a pullback cannot be ruled out in the near term. This may trigger profit taking action in equities. Meanwhile, Nifty outperformed most of its Asian peers as FII buying was seen throughout the week.

"The Implied Volatility of Calls closed at 13.55 per cent, while that for Put options closed at 14.79. The Nifty VIX for the week closed at 19.94 per cent and is expected to remain sideways. PCR OI for the week closed at 1.26 slightly down from the previous week," remarked Bisht.

Bank Nifty

Recovering by 620.20 or 2.86 per cent for the week, Bank Nifty closed at 22,299.60 points as against previous week's closing of 21,679.40 points.

Bank Nifty, for a major part of the August F&O series, traded in a range with stock-specific action. Additions were seen in both ATM Calls and Puts along with declining IVs, which gave more confidence to option writers.

The Bank Nifty has the highest Call base at 23,000 strike, which should be the immediate target on upsides. At the same time, the index found support near 21,500. In the current leg of consolidation, additions were seen in 21,500 and 22,000 strike Puts, which should provide cushion, according to ICICI Direct.com.

Private bank stocks recorded addition in ATM strikes for the series, while Axis Bank and HDFC Bank saw closure in ATM Calls whereas supportive action was also there from PSU banks, which recovered most of its selling last week. This can be a positive trigger for the expiry week, forecast derivatives analysts.

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