Informist, Wednesday, Oct 18, 2023
By Akshata Gorde
MUMBAI – Call writing was seen in out-of-the money options at strikes ranging between 19700 and 19800 as the Nifty 50 index closed in the red today. Simultaneously, there was unwinding of put options at strikes in the same range to lower strikes, suggesting a downward trend for Thursday as well.
The benchmark Nifty 50 index closed 0.7%, or 140.40 points, lower at 19671.10 points following escalation in the Israel-Hamas conflict after a deadly air strike on a hospital in the Gaza Strip. The escalation also resulted in a spike in crude oil prices.
Premiums on call options at 19800 and 19900 strikes fell almost 90%, with the highest open interest change of 9.16 mln contracts seen at 19800 points. Maximum open interest build-up was also seen at the same level, making it a critical resistance for the 50-stock index.
On the put side, investors placed short bets across in-the-money options, expecting a further fall on Thursday. The premium at 19600 strike rose 125%, with an open interest change of 2.5 mln contracts, and the highest open interest build-up of 9.63 mln contracts.
The index is expected to find support at 19550-19600 points and has a critical resistance at 19800 points in the near term. If the index breaches 19800, analysts expect it to go up to 20000 points.
“As long as the index is trading below 19800, the weak sentiment is likely to continue and (the index) could slip to 19600-19575 (points),” Shrikant Chouhan, head of research at Kotak Securities Ltd, said in a note. Chouhan added that a “minor pull-back rally is possible”.
Echoing his thoughts on a near-term bounce-back, Viraj Vyas, technical and derivatives analyst at Ashika Stock Broking Ltd, said, “The put-call ratio shows that call option traders dominated the options chain today, hinting at an overbought market, and may see a bounce-back in the near term.”
The October futures contract of the Nifty 50 closed at a discount of 5.05 points to the spot index with open interest of 9.50 mln, up 0.3%, according to provisional data.
–Nifty 50 Oct closed at 19666.05, down 145.05 points; 5.05-point discount to spot index
–Nifty 50 Nov closed at 19800, down 133.90 points; 128.9-point premium to spot index
–Nifty 50 Dec closed at 19907, down 127.55 points; 235.9-point premium to spot index
HDFC Bank, Reliance Industries, ICICI Bank, Bajaj Finance, Tata Motors, Axis Bank, State Bank of India, Kotak Bank, Polycab India, Infosys, Tata Consultancy Services, and Cipla were among the most actively traded underlying stocks. End
Edited by Rajeev Pai
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