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Equity Futures: Short bets surge as traders hedge positions

Informist, Monday, Feb 14, 2022


By Vivek Kumar


MUMBAI – It was the day of bears today, as equities witnessed aggressive sell-off amid rising geopolitical tensions between Ukraine and Russia. This saw traders hedging in the derivatives market by adding short positions and buying deep-out-of-the-money put options of the Nifty 50.


The benchmark indices witnessed their steepest fall in 10 months today, with Nifty 50 breaching major support levels before finally settling at 16842.80 points. This saw traders aggressively buying put option of 16000 strike price, fearing another bout of selling in the near term.


The benchmark index fell over 3% to close at its lowest level since Dec 21, and as a consequence, its February futures contract witnessed a 7% rise in open interest, indicating addition of short positions.


The premiums of 16000 points put option jumped over seven times to 25 rupees. Intraday, the value of the contract also hit a high of 42.55 rupees, up a whopping 1,200% from the previous close of 3.25 rupees.  


Even deeper out-of-the-money put options of 15100 and 15500 points found buyers today as the sentiment of investors towards equities deteriorated. On the other hand, premiums of major call options slumped 70-90%.


The Nifty 50 is expected to witness further weakness at least towards 16400 points level, and the way it broke key support levels today, the level of 16000 points can also be tested, said Rajesh Bhosale, technical analyst at Angel One.


However, some believe a bounce back is likely in the next couple of sessions after such a sharp fall.


The immediate support levels for the Nifty 50 are placed near 16830 points and 16750 points and somewhere around these levels, the benchmark index will likely bottom out, said Rohit Srivastava, founder and market strategist at Indiacharts.com.


The selling in the market was broad-based today with almost all the sectoral indices ending in the red. The heavyweight Nifty Bank index also slumped over 4% to 36908.55 points, witnessing its biggest fall in around a year.


The open interest in the Nifty Bank index’s February futures contract surged over 18% to 2.2 mln and analysts believe 36000 points level will be a key level to watch for the index as it is the 200-day simple moving average.



–Nifty 50 Feb ended at 16807.00, down 287.15 points; 33.80-point discount to spot index

–Nifty 50 Mar ended at 16873.00, down 273.95 points; 30.20-point premium to spot index

–Nifty 50 Apr ended at 16930.00, down 277.95 points; 87.20-point premium to spot index

The total turnover in the futures and options segment of the National Stock Exchange was higher at 68.5 trln rupees compared to 54.4 trln rupees on Friday.
The turnover in index options was at 64.7 trln rupees against 51.1 trln rupees the previous day. The total premium turnover of index and stock options was also higher at 445 bln rupees compared to 334.6 bln rupees on Friday.
The most actively traded underlying stocks were Tata Consultancy Services, Tata Motors, ICICI Bank, State Bank of India, HDFC Bank, Reliance Industries, Tata Steel, Infosys, Housing Development Finance Corp, Axis Bank and Bajaj Finance.  End



Edited by Maheswaran Parameswaran



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Source: Cogencis

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