Call writers turn aggressive as Put OI addition easing

Highest Call OI and Put OI is seen at the same strike i.e, 18,600 as support level eased by 100 points and resistance level declined by 400 points. The 18,600CE has highest Call OI followed by 18,700/18,500/18,800/19,000/ 19,200/ 19,500/ 18,900/18,900 strikes, while 18,600/18,700/19,200/ 18,800/18,650/19,000 strikes recorded hefty build-up of Call OI.

Coming to the Put side, maximum Put OI is seen at 18600PE followed by 17,700/17,800/18,000/ 18,300/18,500/18,250/18,100 strikes witnessed significant addition of Put OI. Further, 18,200/18,100/ 18,200/ 18,400/ 18,500/ 18,000 strikes witnessed reasonable addition of Put OI.

According to data from ICICIdirect.com, the call strikes continued to witness heavy OI build-up suggesting expectations of limited upsides. The highest Call base has shifted lower to 18600 strike with more than 1.5 crore shares, making it an important hurdle for the week ahead. However, the Nifty is trading below its Put base at 18600 strike and positions are shifting at OTM strikes. Fresh positive bias should be formed above 18500 for upside targets of 18800 and higher towards the monthly settlement.

Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: "From derivatives front, Call writers remained active at 18600 & 18700 strikes. Put writers, however, remained on the back foot and were seen shifting at lower bands. Overall data suggests that the Nifty is likely to remain under pressure as far holding below 18650 level."

"In the week gone by, Indian markets witnessed some volatile moves as Nifty slipped back towards 18,500 level on the back of profit booking, while Bank Nifty once again outperformed overall market as Index posted gains of more than one per cent for the fifth consecutive week," added Bisht.

BSE Sensex closed the week ended December 9, 2022, at 62,181.67 points, a net fall of 686.83 points or 1.09 per cent, from the previous week's closing of 62,868.50 points. NSE Nifty ended the week at 18,496.60 points, lower by 199.50 points or 1.76 per cent, from 18,696.10 points a week ago.

Bisht forecasts: "From technical front, Nifty has tested its 20-day Exponential Moving Average on daily charts and can be seen trading in a downward sloping channel with formation of lower highs, which suggests limited upside in prices. For upcoming sessions, 18350-18250 zone is likely to provide some support to Nifty, while the 43300-43100 zone should act as immediate support for the banking index."

India VIX rose 0.60 per cent to 13.48 level. The concerns regarding low volatility and higher FIIs net longs subsided with recent profit taking as the net longs declined significantly from almost one lakh contracts to just 36,000 contracts during the month so far. However, volatility still remains on the lower side. The Nifty will witness some recovery ahead of the FOMC meeting next week and test recent highs once again.

"Implied Volatility of Calls closed at 11.19 per cent, while that for Put options, it closed at 12.88 per cent. The Nifty VIX for the week closed at 13.40 per cent. PCR of OI for the week closed at 1.27," remarked Bisht.

On the F&O front, FIIs closed their long positions as they sold over Rs5,600 crore in index

Futures as their net longs declined substantially. Also, FIIs closed their longs worth Rs5,600 crore in stock futures. In the index Options segment, FIIs bought Rs13,000 crore amid high intraday volatility.

Bank Nifty

NSE's banking index closed the week at 43,633.45 points, a further recovery of 529.70 points or 1.22 per cent, from the previous week's closing of 43,103.75 points.

Bank Nifty is well placed to surpass 44,000 on upsides. Since the banking index moved above 42500, Put writing activity is moving higher from a weekly perspective. For the coming week, a major chunk of writing is placed at 43000 strike, which remains the intermediate support.

The Bank Nifty has a sizable Call OI base at 44000 strike and a close above this level should trigger a round of covering among Call writers.