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Indices trading above max pain levels

Author: Dhirender Singh Bisht/Thursday, March 4, 2021/Categories: Exclusive

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Indices trading above max pain levels

In last few session the intraday volatility increases and we have seen gap ups and gap downs in opening. Energy and metal stocks are in uptrend and keep on gaining whereas some profit booking seen in PSU bank stocks. In weekly contract there is a call writing seen at and above 15000 call strike whereas put side writing seen at and below 14800 strike. The highest open interest concentration in call is at 15200 strike whereas in put the highest put concentration placed at 14800 strike. In monthly contract the highest put open interest concentration is at 14500 strike whereas the highest call concentration is at 15500 strike followed by 15000 strike. The implied volatility gap between at the money (ATM) call and at the money (ATM) put is normal and we can see writing on both side depending on premium or have to see the implied volatility in upcoming sessions which will attract the option sellers. The India VIX breaches its resistance in last Friday’s session and touched 29.64 level. Later then after we have seen some correction in India VIX which bring it down to its long tern trading range.

The India VIX is trading in a range of 26-18 for last 5 months. The nifty option max pain for current week and next week is at 14800 whereas the banknifty option max pain for same expires is at 35500. The indices are trading above its max pain level which shows now bull is having a grip over bear. Weekly straddle is trading around 193 that implies the option writers are comfortable at +/-193 points movement in coming sessions. The Index is likely to trade in the range of 15200 on upside in upcoming sessions whereas the support is placed around 14800. Beyond these level we can see a sharp movement. 

The writer is a senior research analyst (derivatives) at SMC Global Securities Ltd

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