Call writers moving to OTM strikes

The 20,200CE has highest Call OI base followed by 20,300/ 20,700/ 21,000/ 20,600/20,350/ 20,100/ 20,000 strikes, while 20,200/ 20,350/ 20,500/ 21,000 strikes recorded reasonable addition of Call OI as per the data on NSE after the last Friday session. Select ITM strikes from 20,150 onwards clocked a drop in OI.

Coming to the Put side, maximum Put OI is seen at 20,100 followed by 20,000/20,200/ 20,050/ 19,800/19,700/19,500/19,000 strikes. Further, 20,200/20,100/20,150/ 19,800 strikes witnessed significant Call build-up.

Dhirender Singh Bisht, associate vice-president (technical research-equity) at SMC Global Securities Ltd, said: “Analyzing the derivatives data for Nifty, the highest Call writing activity was recorded at the 20,200 and 20,300 strikes. In contrast, the highest Put Open Interest was concentrated at the 20,100 and 20,000 strikes.”

Call writers started moving their positions to OTM strikes owing to sharp moves seen in the last two sessions. The 20,200 Call strike holds the highest Call base. At the same time, aggressive Put writing is seen across the board Put strikes. Nifty may trade with positive bias till 19,650 level and move towards life highs in coming weeks.

“On the weekly chart, Nifty gained over one per cent, while Bank Nifty surged by more than two per cent, showcasing notable outperformance. Noteworthy, buying interest was seen in PSU banks over the last few sessions, as well as in auto stocks. A technical breakout is evident on the healthcare, IT and pharma indices. However, profit booking was witnessed in media and consumer durable stocks,” added Bisht.

BSE Sensex closed the week ended September 15, 2023, at 67,838.63 points, a further recovery of 1,239.72 points or 1.86 per cent, from the previous week’s (September 8) closing of 66,598.91 points. During the week, NSE Nifty too moved up by 372.4 points or 1.87 per cent to 20,192.35 points from 19,819.95 points a week ago.

Bisht forecasts: “Looking forward to the upcoming week, it is anticipated that Nifty’s trading range will be bound between the psychological levels of 20,000 and 20,400. The prevailing sentiment suggests adopting a buy on dips strategy, provided Nifty remains above the 20,000 level.”

Nifty futures OI rose marginally during the last week as FIIs turned to net longs once again. After remaining negative for almost the entire August series, short covering in stock futures is also visible where FIIs reduced their shorts considerably during the week. Hence, stock-specific momentum due to short covering may continue, according to ICICIdirect.com.

India VIX fell 3.67 per cent to 10.90 level. “In terms of Implied Volatility (IV), Call options for Nifty settled at 10 per cent, while Put options concluded at 11.09 per cent. The Nifty VIX, a gauge of market volatility, closed the week at 11.32 per cent. The Put-Call Ratio of Open Interest stood at 1.47 for the week, indicating a greater inclination towards Put writing as opposed to Calls,” observes Bisth.

As per data from ICICIdirect.com, FIIs continued their short covering as their net longs in the index futures rose to 26,500 contracts from 3,000 contracts. During the week, FIIs bought index futures worth Rs2,160 crore. Stock futures segment also witnessed a fall in aggressive shorts as they fell marginally from 1.6 lakh contracts to 1.34 lakh contracts. FIIs in Index options space sold contracts worth Rs29,300 crore.

Bank Nifty

NSE’s banking index closed the week at 46,231.50 points, higher by 1,075.10 points or 2.38 per cent from the previous week’s closing of 45,156.40 points. “Shifting focus to Bank Nifty, the 46,500 strike exhibited the highest Call Open Interest, closely followed by the 47,000 strike. On the Put side, the 46,000 strike held the highest Open Interest,” remarked Bisht.