Options OI bases moving to lower bands

The latest options data on NSE after the last Friday session is pointing to a drop in resistance and support as both these key levels fell 200 points each to 19,600CE and 19,400PE respectively. The highest 19,600 has highest Call OI followed by 20,000/ 19,500/ 19,700 19,800/ 20,200 strikes, while 19,600/ 19,900/ 19,850/ 19,550/ 19,700 strikes witnessed moderate build-up Call OI.

Maximum Put OI is seen at 19,400PE followed by 19,500/ 19,300/ 19,200/ 18,900 strikes. Further,19,500/ 19,400/ 19,100/ 18,9 00 strikes recorded modest to reasonable addition of Put OI.

Dhirender Singh Bisht, associate vice-president (technical research-equity) at SMC Global Securities Ltd, said:

According to ICICIdirect.com, the Call writers were a bit aggressive due to profit booking seen among heavyweights last week with the highest Call base placed at 19,800 strike. Despite weakness, Put writing largely remained intact where 19,500 and 19,600 strikes held significant OI. Further consolidation is likely in the index if the index moves beyond the range. If it happens, it may trigger further directional movement.

“During the past week, Nifty index closed in red with a loss of slightly over half a percent, while Bank Nifty saw a decline of over one percent. Notably, the IT and pharma sectors experienced significant gains, whereas the financial services, FMCG, and Oil & gas sectors witnessed a notable decline,” added Bisht.

BSE Sensex closed the week ended August 4, 2023, at 65,721.25 points, a net loss of 438.95 points or 0.66 per cent, from the previous week’s (July 28) closing of 66,160.20 points. During the week, NSE Nifty declined by 129.05 points or 0.65 per cent to 19,517 points from 19,646.05 points a week ago. The 19,500 strike can be used as stop loss for long positions.

August F&O series took off with five months high OI amid heavy buying momentum during the series. Also, Nifty premium rose significantly during settlement and moved beyond 150 points before closing near 110 points last Friday. Considering dividend of near 50 points during August series, the net premium is still on a higher side. Hence, Nifty may witness some consolidation in short-term trading. July series VWAP near 19,550 level is acting as an immediate support for Nifty.

India VIX moved to below 11 level as it fell 5.48 per cent to 10.57 level, which is one of lowest levels for the volatility. A fall in volatility remains an absence of risk appetite as the market moves into new series.

Bank Nifty

NSE’s banking index closed the week at 44,879.50 points, a fall of 607.10 points or 1.31 per cent from the previous week’s closing of 45,468.10 points. “Considering OI, the current expected trading range for the Bank Nifty lies between 45,000 and 44,500,” observes Bisht.

The highest OI in Bank Nifty was tilted towards Call writing and ATM 45,500 Call strike holds the highest OI base.

Also, the Bank Nifty OI fell from last July F&O series suggesting some profit booking at higher levels. Hence, analysts give a caution alert in the banking index. If Bank Nifty moves above 45,800 level, investors should consider buying for a target of 46,200 level.

Analysing the derivatives data, it was evident that the Nifty Call options had the highest Open Interest at the 19,600 level, closely followed by the 20,000 level. As for Put options, the highest OI concentration was observed at the 19,400 level, followed by the 19,500 strike.

The implied volatility (IV) for Nifty call options concluded at 9.79%, while put options closed at 11.01%. Additionally, the Nifty VIX, which measures market volatility, ended the week at 11.19%. The Put-Call Ratio Open Interest (PCR OI) settled at 1.16 for the week. Traders are advised to exercise caution and use strict stop losses, as the current volatility is quite low.

Moreover, specific stocks are expected to exhibit movement within the Nifty, while the Nifty trading range for the upcoming week is anticipated to be between 19400 – 19800 levels.

A decisive breakout on either side could provide further direction to the market indices.