We have Bullish View on market on account of
a) futures turned into premium from discount with fresh built of “Long Positions”, volatility peaking out at current levels and put concentration at 5,000.
However, major call writing at 4,900 would lead some more fresh selling at current levels. So, from current levels we do not expect major downside and staggered Buying in cash segment would be perfect options for investors.
Option Analysis
· Call Writing: In today’s trading sessions, major writing was seen between 4,900 to 5,100 strike prices. Following strike prices combined added ~46 lakh shares with majority at 4,900 of 17 lakh shares. In the May series, where we have observed concentration at 5,300 for most part has now shifted to 5,200.
· Put Writing: On the other hand, in today’s trading session we have observed shedding at higher levels and writing at lower levels. Higher strike prices like 5,000 and 5,100 saw shedding of ~11 and ~12 lakh shares respectively. Despite shedding at 5,000 in last few trading sessions, concentration still at 5,000 level of 77.37 lakh shares.
Implications: We believe market has bottomed out for the month of May series on account of concentration of PE still at 5,000 levels. However, today trading sessions of heavy call writing at 4,900 may lead fresh selling at current levels but maintain our view of 4,900 to act as major support for current month. So, the strategy to be adopted by traders should be to create long positions below 4,900.
FIIs and DIIs activity in capital market segment
· FIIs were net sellers of Rs 1,383 crore with Gross buyers of Rs 2,403 crore and Gross Sellers of Rs 3,787 crore.
· DIIs were net buyers of Rs 56 crore with Gross buyers of Rs 1,794 crore and Gross sellers of Rs 1,738 crore.
India VIX (Inverse relationship between Nifty and Indian VIX)
· Volatility for 17th May, 2010 close at 32.05 which is 20.7% higher as compared to previous close, after touching an intraday high of 32.45 and low of 27.95.
Implications: As expected and mentioned in our earlier reports on volatility, it has reached to its resistance level of 30. Now, we have turned Bullish on Nifty with Short on Volatility.
Leveraged positions can be initiated but with strict stop loss.
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