Equity Futures: Calls written across strikes; fresh short bets added

Equity Futures: Calls written across strikes; fresh short bets added

Informist, Wednesday, Dec 20, 2023


By Padmini Dhruvaraj


MUMBAI – Writing was seen across strike prices of the call options expiring on Thursday as the Nifty 50 erased its intraday gains and ended in the red with investors taking out their profits today. Short bets increased at out-of-the-money strikes of put options.


The 50-stock index opened higher and hit a fresh all-time high of 21593 points but fell on the back of losses in shares of financial services, information technology, and metals companies. Eventually, the benchmark index ended 1.4% lower at 21150.15 points.


"Markets witnessed a bout of profit taking and lost nearly one and a half percent, in continuation of the prevailing corrective phase," Ajit Mishra, senior vice-president of technical research at Religare Broking, said.


Premiums across strike prices of the call options fell, indicating that investors expect the Nifty 50 to decline further. "The index failed to show any supporting activity amidst the intensifying selling pressure as 21500CE (call option) writers did not refrain from holding back as the strike mounted the highest open interest," Avdhut Bagkar, technical and derivatives analyst at StoxBox, said in a note.


The 21300 strike price of call options saw the highest net change in open interest with 7.85 mln new positions, while the premium fell 93.8% to 11.50 rupees. Aggressive call selling was also seen at 21700, 22000, and 22400 strike prices.


On the put side, the 21000 strike price had the highest addition of open interest with 2.58 mln new positions, and the premium on the contract rose a whopping 688.3% to 43.75 rupees. Aggressive put selling was also seen at 19150, 20400, and 20650 strike prices. "This puts 21000PE (put option) writers in jeopardy," Bagkar said in his note. If the market fails to hold on at the current level, the sell-off is expected to continue, he added.


The December futures contract of the Nifty 50 closed at a premium of 19.35 points to the spot index today. Open interest in the contract rose 2.49% to 13.08 mln, according to provisional data.


Analysts now expect the Nifty 50 to find support at 20900-21000 and face resistance at 21200. "Volatility is likely to be the hallmark in the near term with India VIX jumping over 4% in a day," Prashanth Tapse, senior vice-president of research at Mehta Equities, said in a note.


Mishra from Religare Broking, however, said it was too soon to conclude that the uptrend in the Nifty 50 had faded until the index breaks below 20700, which is also the 20-day exponential moving average on the daily chart.


--Nifty 50 Dec closed at 21169.50, down 358.25 points; 19.35-point premium to spot index

--Nifty 50 Jan closed at 21326.60, down 336.80 points; 176.45-point premium to spot index

--Nifty 50 Feb closed at 21461.60, down 326.90 points; 311.45-point premium to spot index


Reliance Industries, Tata Consultancy Services, Oil and Natural Gas Corp, Voltas, State Bank of India, Infosys, Coal India, HDFC Bank, Tata Power, Tata Consumer, and Bajaj Finance were among the more actively traded underlying stocks.  End


Edited by Rajeev Pai


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