After the news about another Covid-19 vaccine fuelled the stock market to continues its upside move towards 13,000 level. The Call writers are unwinding their position in monthly contracts, whereas Put writers are adding their positions in weekly as well as in monthly contracts. This is signifying bullishness in the market. Again banking and financial stocks led this rally whereas profit booking seen in IT and pharma stocks. The 13,000 level is a psychological level where we can see some resistance. As the market rallied the India VIX cooled off and trading around 19.8 levels. In upcoming week, the India VIX is expected to trade in a range. The Implied Volatility (IV) gap between Calls and Puts in weekly contract is normal. The Calls and Puts are normal priced in current scenario. In monthly expiry, the gap between Call and Put is little wide indicating Puts are little bit over priced as compared to Calls, which will attract the Put sellers to act in the market. The Nifty straddle for monthly expiry on Tuesday closed at 125 lower than the previous week, indicates that the option seller are comfortable in the price movement of +/-125 from current level. These are the levels where the option sellers are comfortable on their sold position in straddle. The option max pain for Nifty current week expiry is at 12,800 whereas monthly is at 12,500. The option max pain for Bank Nifty current week expiry is at 29,000 whereas monthly is at 27,500.
The band is shifting upwards week on week basis indicating the market is still in the grip of bulls. In coming sessions, the market is likely to trade in the range of 12,700 to 13,100 with upward biasness. Stock-specific movement can be expected and buying interest in banking stocks is going to be still intact.
The writer is a senior research analyst (derivatives) at SMC Global Securities Ltd