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Long Build-Up In IT, Pharma; Short Build-Up In Auto, Banking Stocks

Author: Dhirender Singh Bisht/Friday, April 9, 2021/Categories: Exclusive

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Long Build-Up In IT, Pharma; Short Build-Up In Auto, Banking Stocks

As week passed by we have seen a bumpy ride in the domestic stock market. Uncertainty is looming over the market on rising cases of coronavirus amid increased volatility. Now, the IT and phamra stocks are on radar as market is losing confidence of bulls. In weekly contract, Call writers are aggressive as compared to Put writers. The highest Open Interest (OI) concentration on Call side is at 15,000 strike followed by 14,800 strike whereas on Put side the highest outstanding position is at 14,500 strike. Call positions are heavier than Put outstanding position in current week contract. On the other hand, monthly contract Call and Put option outstanding positions are somehow same. Highest Call and Put Open Interest outstanding position is same at 14,500 strike and 15,000 strike just like weekly contract.
From last few sessions, there is a long build-up in IT and pharma sectors whereas short build- up seen in auto and banking sectors. The India VIX is trading around 20-22 range right now. The VIX is trading in broader range of 26-16 for a long period. From past few sessions, it was observed that spikes are rising in India VIX due to high intraday volatility. The Intraday range in India VIX is quite high as compared to the normal scenario. The Implied Volatility (IV) gap between ATM (At The Money) Calls and Puts in weekly contract is normal. The Calls and Puts writers are quoting normal premium based on current Greeks.
The Nifty straddle for monthly expiry on Tuesday (April 6) closed at 197 higher as compared to last week that implies the option writers are comfortable at +/- 197 points movement in coming sessions. The BankNifty straddle for current week is at 824, which is higher than previous week. The option max pain for Nifty current week contract is at 14,700 and for BankNifty current week contract is at 32,700 whereas both indices are trading around its high max pain level. In coming sessions, index is likely to trade in the range of 14,800 to 14,500 beyond these levels can see a good movement. IT and pharma stocks continue to outperform as buying interest seen in these stocks.

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

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