Options bets signal upward bias

The change in Open Interest (OI) bases on Call and Put options is pointing to higher resistance and support levels by 1,000 points as maximum Call OI is at 26,000CE and Put base at 24,000PE. And Implied Volatility (IV) fell drastically on both sides of the options chain.

The 26,000CE has highest Call OI followed by 25,500/ 25,400/ 25,000/ 24,800/ 26,600/24,500/25,300/ 26,600 strikes, while 26,600/ 26,550/ 24,800/24,850/ 25,300/ 25,400 strikes recorded significant addition of Call OI. All ITM strikes from 24,600CE onwards witnessed marginal OI fall.

Coming to the Put side, maximum Put OI is seen at 24,000PE followed by 24,800/ 23,500/ 24,500/ 24,700/24,300/ 23,900/ 20,150/ 23,900 strikes. Further, 24,800/ 24,900/ 24,000/ 24,150 strikes recorded reasonable build-up of Put OI. Select Put OTM strikes posted modest fall in OI.

Dhirender Singh Bisht, associate vice-president (technical research-equity) at SMC Global Securities Ltd, said: “In the derivatives market, Nifty highest Call Open Interest is at 25,000 and 24,900 strikes, while for Put side highest Open Interest was observed at the 24,800 and 24,500 strikes.”

Last Friday’s session witnessed a sharp up move. However, Call writing is still visible at the ATM 24,500 strike. Aggressive Put writing took place as highest OI building up at ATM 24,400 and 24,500 strikes. If Nifty remains at current level, a covering move towards 24,800 level is more likely. However, a fresh round of weakness is likely only if Nifty breaches 24,200 level once again.

“NSE Nifty index gained over one per cent and closed near its record high, while Bank Nifty and Financial Nifty both saw gains of around one per cent. Most sectorial indices ended in the green, with the reality index being an exception. Small-cap and metal stocks were among top gainers on a weekly basis,” added Bisht.

BSE Sensex closed the week ended August 23, 2024, at 81,086.21 points, a net recovery of 649.37 points or 0.80 per cent, from the previous week’s (August 16) closing of 80,436.84 points. For the week, NSE Nifty also rose by 282 points or 1.14 per cent to 24,823.15

points from 24,541.15 points a week ago.

Bisht forecasts: “The key level to watch this week is 24,800-24,850 zone as it previously served as resistance based on option data. Technically, the Nifty’s strong resistance zone is between 25,000 and 25,100, while support is seen around 24,700 to 24,600 zone. Traders are advised to adopt a buy on dip strategy, provided the support level holds on downside.”

Moreover, Open Interest in Nifty futures fell substantially during the ongoing August F&O series. Nifty OI fell from over 1.6 crore shares to nearly 1.2 crore shares suggesting prevailing uncertainties.

India VIX rose 4.25 per cent to 13.55 level. The volatility index India VIX also eased to below 14.5 per cent. Despite high intraday moves, continued declines seen in India VIX suggesting building up of positive bias. Analysts expect a move below 13 level is crucial for sustainable up move in the coming sessions. Nifty may continue to remain in the range of 24,000-24,800 in the August series.

“Implied Volatility for Nifty’s Call options settled at 11.20 per cent, while Put options concluded at 12.07 per cent. The India VIX, a key market volatility indicator, closed the week at 13 per cent. The Put-Call Ratio of Open Interest stood at 1.17 for the week,” said Bisht.

FIIs in the F & O segment further offloaded their positions amid prevailing weakness seen in the last few sessions. FIIs’ net long positions in index futures are almost flat to 4,000 contracts as OI continues to fall. Despite the recent weakness, retail participants built-up their long bets to 58,000 contracts as on Friday from 38,000 contracts in the previous week. However, FIIs in stock futures increased their long positions marginally to 5.8 lakh contracts from 5.5 lakh contracts seen last week.

Bank Nifty

NSE’s banking index closed the week at 50,933.45 points, marginally higher by 416.55 points or 0.82 per cent from the previous week’s closing of 50,516.90 points. “For the Bank Nifty, there was notable Call and Put Open Interest at the 51,000 strike, making it the crucial level to monitor for the upcoming week,” remarked Bisht.