In trading sessions, fresh built-up of short positions was observed at higher levels. Short positions built-up was reflected by increase in open interest with decline of premium amount from ~Rs 18 to ~Rs12. Coming to options data, the most active strike prices was between 5,800 to 6,000. 6,000 CE added highest open interest of 5.6 lakhs and 5,900 PE added open interest of ~9 lakhs shares. We believe market would be trading in a narrow range of 5,900 to 6,000. Any large moments can be expected if markets breaks these two levels with volume. However, We expect December expiry to settle between 5,800 to 6,000. The options strategy to be adopted by an traders would be short strangle by selling 5,800 PE and 6,000 CE and wait till expiry.
India VIX (Inverse relationship between Nifty and Indian VIX)
· Volatility for 20th December, 2010 close at 20.8 which is 2.7% higher as compared to previous close, after touching an intraday high of 21.9 and low of 20.2
Implications: For last 3-4 months, Indian VIX is trading near to its support. So, We expect volatility to increase going forward which will lead some correction in market because it has inverse correlations.
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