High OI bases point to upside potential
Rising short positions by retail traders suggest some caution at higher levels
image for illustrative purpose
F&O At A Glance:
- Highest Put OI at 24,000PE
- Highest Call OI at 25,000CE
- India VIX fell 1.24% to 12.70 level
- IV of 25,000CE is 9.57 and 11.04 for 24,000PE
The highest Call OI base is holding resistance level at 25,000CE for a second consecutive week, while the support level rose by 1,000 points to 24,000PE as per the latest options data on NSE after Friday session.
The 25,000CE has the highest Call OI followed by OTM strikes in the 24,400-26,00 range. Call ITM strikes from 24,300CE till 24,000CE recorded moderate Call OI, while 24,200/ 24,600/ 25,000/ 24,600/ 24,800/ 25,000/ 25,200 strikes added moderate Call OI.
Coming to the Put side, maximum Put OI is seen at 24,000PE followed by 24,300/ 24,200/ 23,800/ 23,600/ 24,250/ 23,000/ 22,500s strikes. Further, 23,500/ 23,600/ 23,400/ 23,500/ 23,800 strikes witnessed reasonable addition of Put OI.
Dhirender Singh Bisht, associate vice-president (technical research) at SMC Global Securities Ltd, said: “In the derivatives market segment, Nifty options showed the highest Call Open Interest at the 25,000 and 24,500 strikes, while the highest Put Open Interest was observed at the 24,000 and 24,200 strikes. For the Bank Nifty, the highest Call Open Interest was observed at the 53,000 and 54,000 strikes, while on the put side, the highest Open Interest was at the 52,500 and 52,000 strikes.” Higher Call writing is visible at OTM Call strikes compared to Put strikes. And it’s pointing to some pressure at higher levels. Highest Put base at 24,000 strike may restrict immediate downsides. Hence, a move below 23,800 may trigger further weakness in the markets. On the higher side, the Call base placed at 24500 is likely to act as a major hurdle in the weekly settlement.
“Last week, NSE Nifty index reached a record high and closed with a weekly gain of over one per cent, while Bank Nifty rose by more than 0.5 per cent and underperformed. Bank Nifty back to crack down in HDFC Bank after Q1 result declaration. Major gainers were IT, pharma, and midcap stocks, while PSU banks lagged behind,” observed Bisht.
BSE Sensex closed the week ended July 5, 2024, at 79,996.60 points, a net surge of 963.87 points or 1.21 per cent, from the previous week’s (June 28) closing of 79,032.73 points. For the week, NSE Nifty also rose by 313.25 points or 1.30 per cent to 24,323.85 points from 24,010.60 points a week ago.
Bisht forecasts: “It is expected that Bullish momentum is likely to carry in upcoming sessions as well and traders should use dips to create fresh longs as far Nifty hold above 24,000 level.”
India VIX fell 1.24 per cent to 12.70 level. “Implied Volatility for Nifty’s Call options settled at 12.69 per cent, while Put options concluded at 13.07 per cent. The India VIX, a key market volatility indicator, closed the week at 13.35 per cent. The Put-Call Ratio of Open Interest (PCR OI) stood at 1.25 for the week,” remarked Bisht.
The volatility index fell below 13 level. However, analysts forecast that it may increase towards
15 level and don’t see major decline due to upcoming quarterly results and Union budget in the mid series.
FIIs in F&O space continue to build their long positions. From almost 3 lakh net shorts in early June, now FIIs are with net longs with nearly 3.5 lakh contracts net long in Index futures. Rising short positions by retail traders suggest some caution at higher levels. In the stock futures segment, FIIs remain net longs with over 6.8 lakh contracts.
Bank Nifty
NSE’s banking index closed the week at 52,660.35 points, higher by 318.10 points or 0.60 per cent from the previous week’s closing of 52,342.25 points.
