MUMBAI: Traders anticipate the current uptrend in the Nifty to continue in the next few trading sessions , going by options data on the National Stock Exchange (NSE). Derivatives analysts say that the substantial put writing in at-the-money and near-the-money puts suggests that the downside in the Nifty could be limited from these levels.
Normally, when a trader is bearish on the market he buys a put option, but put writing underlines bullish undertone in the market as it is a high risk trade where unlimited losses can occur compared with buying a call option where losses are limited to extent of the premium paid. "We observed that put writers were highly active at 5800 and 5900 put strikes hinting at their bullish stance," said Shshank Mehta, derivatives strategist, Nirmal Bang Securities.
In the past two trading sessions, over 20 lakh puts have been written at 5800 and over 40 lakh Puts at 5900 and almost all of these entered into the system, meaning that the put writers did not book profits showing their confidence in the rally.
However, as the maximum activity remains in 6000 call options, analysts say it could act as a resistance level on the upside. The heavy selling pressure in the above strikes were also evident with the sharp drop in IVs which dropped from above 20% levels to around 18% on Wednesday and further dropping to below 16% on Thursday.
Mr Mehta said a rise in open interest on sharply falling IVs indicates selling pressure. He believes that the Nifty could head towards 6000 and can further rise till 6150 levels.
Normally, when a trader is bearish on the market he buys a put option, but put writing underlines bullish undertone in the market as it is a high risk trade where unlimited losses can occur compared with buying a call option where losses are limited to extent of the premium paid. "We observed that put writers were highly active at 5800 and 5900 put strikes hinting at their bullish stance," said Shshank Mehta, derivatives strategist, Nirmal Bang Securities.
In the past two trading sessions, over 20 lakh puts have been written at 5800 and over 40 lakh Puts at 5900 and almost all of these entered into the system, meaning that the put writers did not book profits showing their confidence in the rally.
However, as the maximum activity remains in 6000 call options, analysts say it could act as a resistance level on the upside. The heavy selling pressure in the above strikes were also evident with the sharp drop in IVs which dropped from above 20% levels to around 18% on Wednesday and further dropping to below 16% on Thursday.
Mr Mehta said a rise in open interest on sharply falling IVs indicates selling pressure. He believes that the Nifty could head towards 6000 and can further rise till 6150 levels.
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