Nifty trading at premium, strong put writing with call shedding across the strike prices indicates upside momentum to continue. However, we expect no major upside on account of low put writing above 5,400 and volatility trading at its support level. Thus, the intermediate trend suggests the market to trade in a range of 5,500 to 5,300 with negative bias.
Option Analysis:
· Call writing: In today’s trading session, shedding in calls was witnessed across strike prices. Maximum writing was seen at 5,500 CE and 5,400 CE of 2.58 lakh contracts and 2.67 lakh contracts respectively. Concentration is being observed at 5,600 CE of 100 lakh contracts.
· Put Writing: On the other hand, fresh writing was observed at and below 5,400 and shedding at higher strikes with maximum at 5,500 PE. 5,300 PE and 5,200 PE added 5.61 lakh and 5.91 lakh contracts respectively. Concentration is being observed at 5,300 PE of 119 lakh contracts.
Implications: Put concentration and call shedding witnessed at 5,400 strike price indicates this would be a crucial level for the markets acting as support for intermediate term. However, we still maintain our view for August series to settle below 5,600 on account of call concentration and 5,300 on account of put concentration.
India VIX (Inverse relationship between Nifty and Indian VIX)
· Volatility for 12th August, 2010 close at 18 which is 0.6% lower as compared to previous close, after touching an intraday high of 18.71 and low of 16.74.
Implications: Indian VIX was almost flat as compared to yesterday’s trading session and closed near the high after making a low of 16.74. We expect it to move upwards and are Bullish on the same.
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