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Options Band Moving With Upward Bias

Author: Dhirender Singh Bisht/Wednesday, November 25, 2020/Categories: Exclusive

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Options Band Moving With Upward Bias

Finally this week the NSE Nifty progressed and able to close above 13,000 level. The 13,000 strike Call writers are trapped now and Put writers are active at 13,000 strike. Put writing at 13,000 and lower strikes seen in the market whereas Call writers are not confident enough as like Put writes. Among the small-cap and mid-cap stocks, weakness was seen in media stocks. The India VIX is consolidating in a range of 16 to 22 as the market is moving upwards. The VIX is expected to trade sideways. 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 Calls and Puts is little wider 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 149 higher than the previous week, indicates that the option sellers are comfortable in the price movement of +/-149 from current level. These are the levels where the option sellers are comfortable on their sold position in straddle. The cumulative Open Interest (OI) of active Calls and active Puts gap in current month expiry is quite wide. Put sellers’ Open Interest is quite high as compared to the Call sellers. This indicated bullishness in the market and support on minor corrections. The option max pain for Nifty current month expiry is at 12,900 whereas next week’s expiry is at 13,000. The option max pain for BankNifty current month expiry is at 29,200 whereas next week’s expiry is at 29,500. The options band is shifting upwards on week-on-week basis indicating the market is still in the grip of bulls. In coming sessions market is likely to trade in the range of 12,800 to 13,300 with upward biasness. Stock-specific movement can be expected.

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

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