Last one week market is trading in a wide with stock-specific movement and hovering around 14,500 level. The energy and banking stocks showed strength against the market whereas mid-cap and pharma sectors were weak against the market. In weekly contract, Call writers are active above 14,650 strike and adding Open Interest (OI) whereas on other side Put writers are active at 14,400 points and below strikes. The Put writers are aggressively writing at 14,400 strike and had highest concentration at this strike in current week. On the other hand, the highest Call concentration is at 15,000 followed by 14,600 for the same expiry contract. In monthly contract, highest concentration in Calls is at 15,000 strike, whereas in Puts at 14,000 points. VIX bounces back and trading around 23-25 level as FII are liquidating their positions at higher levels. Somehow market is not expecting much correction as there is Union Budget on February 1, 2021. The VIX is trading in a range for long time and 26 is a crucial level as it acts as resistance for long time. The trader should keep a check on this level as once it breaches, then we can expect a good sell off in the market. The Implied Volatility (IV) gap between Calls and Puts in weekly contract is little wide. As market is trading volatile the fear among the Put sellers is high as sometime sudden sell off come in the market. This is the reason why they are charging high Implied Volatility as compared to the normal scenario, which will attract the Put sellers in the market. The Nifty straddle for monthly expiry on Tuesday closed at 164 same as compare to last week, indicates that the option sellers are comfortable in the price movement of +/164 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 monthly contract is at 14,500. The option max pain for BankNifty monthly contract is at 32,200. In coming sessions index is likely to trade in the range of 14,200 to 14,850 with stock-specific movement.
The writer is a senior research analyst (derivatives) at SMC Global Securities Ltd