Put Open Interest addition indicates 10,700 support level
With NSE broad-based index Nifty continuing to slide from 11,069 level since February 7, the seven-session losing streak resulted in a loss of over three per cent.
Nifty band narrows down to 10,600-10,800 for weekly expiry, for which the highest Open Interest (OI) volume of 1,026,300 Call contracts was at 10,800 strike, while 10,600 strike recorded highest OI of Puts comprising 697,950 contracts. For monthly expiry, the highest Call OI is at 11,000 strike and highest Put OI at 10700 level.
Dhirender Singh Bisht, senior analyst (derivatives) at SMC Global Securities, said: “The options Open Interest concentration is at the 11000-strike Calls of monthly contracts with the highest Open Interest of above 40 lakh shares; among Put options, the 10700 and 10400 -strike taking the total open interest to 30 lakh shares each, with the highest Open Interest among Put options.
Next support is placed around 10600-10550 levels.” Nifty shed 345 points in the seven sessions to close the previous week ended February 15, 2019, at 10,724.40 points. During the period, BSE Sensex tanked 1,165 points and ended the week at 35,808.95 points. Bisht observed that if Nifty falls below the 10600 mark, it could correct to 10500 levels on the back of further selling.
On bounce the index will face strong resistance at 10800-10850 levels. Nifty was down 0.31 per cent with OI up by 1.21 per cent. Bank Nifty down by 0.74 per cent with OI up by 9.06 per cent. Stock futures are building up.
“Nifty dragged down due to liquidation of long positions. Recent data has again turned cautious and is indicating probability of further profit booking. We have seen Call writing and Put unwinding in recent trading sessions.
Call writers were active in 10800, 10900 strikes indicating limited upside. This clearly indicates lack of buying interest and discomfort in the market. The levels of 10600 will remain crucial for this week as indicated by Option Open Interest concentration,” forecasts Bisht.
On expiry day of Thursday, being the first expiry of Nifty weekly options on February 14, the NSE broader index was traded in tight vicinity of 10,750 with Put writers were aggressive at 10,700-10,750 strike range. Call writers were aggressive at 10,750-10,850 range.
Nifty witnessed continuous decline from 11100 to 10600 levels within seven sessions. It has come closer to the major support base of 10600. The index may witness short covering if finally, these levels are held. Since the start of 2019, Nifty has been finding value buying from these levels. The volatility did not see any major upward movement on account of quite aggressive Call writing in 10800 and 11000 strikes.
Nifty futures have added shorts to the tune of six per cent in the recent decline with the Nifty futures premium has declined from 35 to 25 points, according to ICICI Direct. Coming to Bank Nifty, which closed at 26,794.25 points on last Friday, the banking index too had option writing band at 26,800 below Put and 27,000 above Calls. This data was indicating shifting of option writers to Nifty from Bank Nifty.
Post-RBI monetary policy, Call writers of 27,500 continued to dominate and this propelled the Bank Nifty to move below 27,000 level. However, on the back of positive news flows, the premium in Bank Nifty futures rose to 120 points from 40 points. Due to these overleveraged positions, the index remained under pressure. It fell sharply on the last day of the week, observes ICICI Direct.
The price ratio of Bank Nifty-Nifty moved marginally higher and ended near 2:51 and this ratio may consolidate near this range with support near 2:47.