The continuous FII investment is fuelling the Indian market. The NSE Nifty is now trading above 14,500 level and every week it’s crossing the key psychological level of the index. The IT and pharma stocks showed strength against the market whereas the energy and media sectors were weak against the market. In weekly contract, Call writers are active above 14,600 strike and adding Open Interest (OI), whereas on other side Put writers are active at 14,500 and below strikes. The Put writers are aggressively writing Puts at 14,500 strike. Whereas highest Put Open Interest outstanding in monthly and weekly contract is at 14,000 strike. On Call side, the highest OI is at 15,000 strike. VIX bounced back and is trading around 22 level. The India VIX is trading in a range 17.5 to 24 for more than five months. Every time the VIX corrected to 16, it tests this level as support. As suggested last week, India VIX took resistance and expects to trade in a range in upcoming sessions. The crucial level for VIX is 26 if this level breaches then we can expect a sharp selloff in the market. The Implied Volatility (IV) gap between Calls and Puts in weekly contract is little wide. As market is trading high the fear among the Put seller is high and that why they are charging the high Implied Volatility as compare to normal scenario which will attract the Put sellers. The Nifty straddle for monthly expiry on Tuesday closed at 151 same as compare to last week, indicates that the option sellers are comfortable in the price movement of +/151 from current level. These are the levels where the option sellers are comfortable on their sold position in straddle. The options max pain for Nifty monthly contract is at 14,500. The option max pain for Bank Nifty monthly contract is at 32,100. In coming sessions, the index is likely to trade in the range of 14,300 to 14,800 with stock-specific movement.
The writer is a senior research analyst (derivatives) at SMC Global Securities Ltd