Shedding of put at higher levels and call writing indicates market to trade in a narrow range of 4,900 and 5,100 for near term and 4,800 for worst case scenario in June series. So the strategy to be adopted by traders to sell CE at 5,300 and PE of 4,800 or Cash traders can initiate fresh Buy when market is closer to 4,900 and sell at 5,100.
Option Analysis
· Call Writing: Fresh writing of 9.69 lakh shares and 6.81 lakh shares was observed at 5,300 and 5,000 strike prices respectively. We believe 5,200 to act as intermediate resistance and 5,300 for June series on account of major activity taking place and concentration of 65.47 lakh shares.
· Put Writing: On the other hand, fresh writing of put was observed at 4,900 and below whereas shedding was observed at 5,000 and above. Major writing was observed at 4,800 of 8.39 lakh shares and major shedding at 5,000 of 8.39 lakh shares. Concentration of open interest is observed at 4,800 level.
Implications: Put shedding at 5,100 and 5,000 levels indicates that weakness would be seen at higher levels with buying interest emerging at lower levels. We expect the markets to trade in the range of 5,300 and 4,800 for June series on account of concentration and 4,800 worst case scenario on account of heavy put writing
FIIs and DIIs activity in capital market segment
· FIIs were net sellers of Rs 403 crore with Gross buyers of Rs 1,625 crore and Gross Sellers of Rs 2,028 crore.
· DIIs were net sellers of Rs 202 crore with Gross buyers of Rs 795 crore and Gross sellers of Rs 997 crore.
India VIX (Inverse relationship between Nifty and Indian VIX)
· Volatility for 7th June, 2010 close at 27.99 which is 13.23% higher as compared to previous close, after touching an intraday high of 28.48 and low of 24.21.
Implications: Volatility surged today till ~28 levels after closing negative for past 3 trading sessions. We expect volatility to come down further and thus suggest going short on the same.
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