On Monday, Nifty started the day in red but saw a sharp recovery in the first half itself and traded in a narrow range through the day, closing at 5498. The basis in Nifty Futures turned into premium and kept increasing through the day (almost to 20 pts) coupled with a rise in its open interest, suggesting fresh longs entering into the system.
In option data, we saw unwinding in calls at 5500 strike due to writers cutting their position in the midst of a sharp intra-day recovery. On the other hand, puts writers swung back in action at 5400 and 5500 strikes, which added about a million units each. This hints that Monday's recovery may not be short-lived.
We continue to believe that the current expiry will remain fairly volatile with Nifty taking support between 5420 and 5380. While on the upside we believe Nifty can move up to 5560 and 5620 levels. Our view emerges from option concentration levels at 5400 (for puts) and 5600 (for calls) strikes combined with Nifty IVs heading for an upmove from current sub-17 levels.
Overseas, the DJIA and S&P 500 finished off last week in the red, down nearly 2%, its sixth consecutive weekly loss. Eyes are now on the US Consumer Price Index and May retail sales that may indicate a struggling economy. Back home, we have monthly inflation data on Tuesday and RBI mid-quarter review on Thursday.
It would be prudent to trade by buying options (calls for going long and puts for going short) on Nifty as IVs are on the rise.
In option data, we saw unwinding in calls at 5500 strike due to writers cutting their position in the midst of a sharp intra-day recovery. On the other hand, puts writers swung back in action at 5400 and 5500 strikes, which added about a million units each. This hints that Monday's recovery may not be short-lived.
We continue to believe that the current expiry will remain fairly volatile with Nifty taking support between 5420 and 5380. While on the upside we believe Nifty can move up to 5560 and 5620 levels. Our view emerges from option concentration levels at 5400 (for puts) and 5600 (for calls) strikes combined with Nifty IVs heading for an upmove from current sub-17 levels.
Overseas, the DJIA and S&P 500 finished off last week in the red, down nearly 2%, its sixth consecutive weekly loss. Eyes are now on the US Consumer Price Index and May retail sales that may indicate a struggling economy. Back home, we have monthly inflation data on Tuesday and RBI mid-quarter review on Thursday.
It would be prudent to trade by buying options (calls for going long and puts for going short) on Nifty as IVs are on the rise.
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