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Options Data Points To Stock-Specific Movement

Author: Dhirender Singh Bisht/Wednesday, January 6, 2021/Categories: Exclusive

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Options Data Points To Stock-Specific Movement

As the domestic stock markets are steadily taking upside movement, the NSE Nifty is trading above its rollover over level. The NSE benchmark index is currently trading above its psychological level of 14,000 points. The IT and mid-cap stocks showed strength against the market. In weekly contract, the Call option sellers are active at and above 14,300, whereas Put option writers are active at and below 14,100 level, which stiff the range of the market to 14,300 to 14,100 points. In monthly contract, some liquidation in ATM (At The Money) Call strike seen whereas Put writers are still active at 14,000 level. The highest concentration of Calls in weekly contract is at 14,500 points, whereas the Put highest concentration is at 14,000 strike. The Implied Volatility (IV) gap between At The Money (ATM) Call and At The Money (ATM) Put is around 4-5 per cent, which is a slightly higher than the normal scenario for the derivatives market. The gap between the Call Implied Volatility and Put Implied Volatility expand as compared to the last week. The Put is little expensive compared to Calls, which will attract the option writer to write Put options. From more than five months, India VIX is majorly trading in range of 24 to 18, whenever there is a spike in volatility its settle down later on. The India VIX is trading around 20 and expected to trade in a range for upcoming sessions. The Nifty option max pain is at 14,200, whereas the Bank Nifty option max pain is at 31,500 strike. The continuous upward shifting on option max pain level indicated that bulls are having a grip over bears. Weekly straddle is trading around 146, which is somehow around equal to the previous week indicates that the option writers are comfortable at +/-146 points movement in coming sessions. The Index is likely to trade in the range of 14,500 on upside and 14,000 on downside in upcoming sessions as it is also a psychological level. Every dip in market can be considered as a buying opportunity and stock-specific movement can be expected.

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

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