Finally in monthly expiry week of September, bears take a grip on the market. NSE Nifty could not sustain above 11,500 level this time also. Selling in banking, metal and auto continued and finally led the market towards 11,200 level. Some buying interest was seen in IT and pharma in Tuesday session. At 11,300 and above, Call strikes seen aggressive Call writing. Whereas on Put side, some Open Interest (OI) addition seen at 11,000PE, which holds the maximum OI for this expiry on September 24. The Option Pain on Tuesday session shifted from 11,400 to 11,250, which indicates shift of range to lower side in Nifty index. In next weekly expiry (October 1), Call writers are more active as compare to Put writers, which indicates the limited upsides or sell on rise. The India VIX closed at 21.01 touching the intraday high of 23.27 in Tuesday session.
As indicated earlier, the volatility is trading near to its upside breakout level, which indicates fear in the market. There is a highly inverse correlation between volatility and market so rising volatility suggests fall in the market in coming session. The current week straddle closed on Tuesday at 133 higher than previous week indicates +/- 133 point movement in the market. These are the levels, where the option sellers are comfortable on their sold position in straddle. On contrary to this in current week, Call writer are more aggressive than Put, which means that there is less chances that this level to be sustain.
Earlier this week, there is a high volatility in Calls and low volatility in Puts, which attract the Call sellers and Put buyers in the market. Now, the volatility on both sides is at par which somehow implies that the Call sellers and Put sellers now will be active in upcoming session. The Nifty is likely to trade in the range of 11,300 on upside and 11,000 on downside as it is also a psychological level in upcoming expiry. The global cues are also volatile so trades should keep a track of global cues, which will lead the movement in the market.
The writer is a senior research analyst (derivatives) at SMC Global Securities Ltd