Nifty trading at a premium to spot. Higher call activity at and above 5,600 and 5,700 strike price as compared to puts along with major put writing at 5,500 and 5,400 levels indicates markets to be range bound. However, we see the markets to trade in the range of 5,600 on the upside and 5,400 to act as a strong support.
Option Analysis:
· Call writing: In September series, fresh writing was seen between 5,600 and 5,400 with major shedding at 5,300 CE of 2.57 lakh shares. Maximum writing was witnessed at 5,700 CE of 10.55 lakh shares. Concentration is observed at 5,600 CE of 84 lakh shares.
· Put Writing: On the other hand, maximum writing was witnessed at 5,500 PE and 5,400 PE of 11.41 lakh shares and 10.87 lakh shares and major shedding at 5,100 PE of 10.90 lakh shares. Concentration is observed at 5,400 PE of 10.51 lakh shares.
Implications: Negative basis on back of strong call writing and less put writing at higher strike prices. We believe markets to trade in a narrow range of 5,600 and 5,400 for September series.
India VIX (Inverse relationship between Nifty and Indian VIX)
· Volatility for 1st September, 2010 close at 16.7 which is 9.6% lower as compared to previous close, after touching an intraday high of 18.47 and low of 16.66.
Implications: Indian VIX plunged drastically in today’s trading session and closed at the low. We expect it to move upwards and are Bullish on the same which would have negative impact on Nifty.
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