In today trading sessions, we have observed winding up of long positions which was reflected in decline in Nifty open interest and premium narrowing down from ~9 to 3. Coming to options data the major activity was taken between 5600 to 6100 strike prices. We expect market to continue its negative trend on back of huge put unwinding at 5,600 strike prices with no fresh writing. Currently, PCR December series is trading at 1.2 and it has declined significantly from 1.45 at beginning of December series. Declining trend of PCR indicates weakness in the market to continue. As, expect market to faced resistance at 6,000 was unable to sustain. However, the wider range for the December series would be 5,700 to 6,100 levels and short term range would be 5,850-6,000. The strategy to be adopted by traders for December series should be Bear Call spread sell 6000 CE and buy 6100 CE in rising market.
India VIX (Inverse relationship between Nifty and Indian VIX)
· Volatility for 15th December, 2010 close at 21.5 which is 0.2% lower as compared to previous close, after touching an intraday high of 22.1 and low of 20.7
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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