As the week gone by lot of action seen in Index, the NSE Nifty took a dip below its psychological level of 11,000 and bounced back. In current week expiry, the option writers are active at 11,000 Put strike and 11,500 Call strike, whereas in monthly expiry the highest concentration of Put is at 10,500 strike, which indicates fear in Put writers. From recent bottom, Nifty future already retraced near to its 61.8 per cent Fibonacci level of 11,311. India VIX is trading in a zone of 23 to 19 unless the upper level not breached, we can’t expect any sharp movement in the index. The intraday volatility will remain in picture for next few sessions.
As the market bounced, the volatility also cooled off and gave an indication of sideways movement in coming sessions with intraday volatile moves. The weekly option pain is at 11,200 and weekly straddle is trading around 125, which indicates that the option writers are comfortable at +/-125 points movement in coming sessions. The difference between the Implied Volatility (IV) in At The Money (ATM) Call and ATM Put is around +4% where Puts are at a higher premium, which will attract more Put sellers as compared to the Call writers. Though the difference gap of Implied Volatility is less which implies that there will be rise in index, but not sharp as Call seller also getting good premium at this volatility. On daily chart, the oscillator are still showing mixed signal and trading in between range of oversold and over bought zones.
Derivatives data of heavy weights points towards, some more upside movement in index along with bullish bias. The Nifty is likely to trade in the range of 11,400 on upside and 11,000 on downside as it is also a psychological level in upcoming expiry. The stock-specific movement can be expected with buy on dip strategy in index.
The writer is a senior research analyst (derivatives) at SMC Global Securities Ltd