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Stock options: Preferred instrument to trade in high volatility
mmentary
As volatility across the globe rose significantly due to geopolitical uncertainty, sharp moves were there in stocks on both sides due to which playing a directional move is getting difficult. The dollar index moved above 97 levels whereas Brent crude moved to seven-year high levels due to fresh sanctions being imposed on Russia. Despite some negatives, FIIs has turned positive in the stock futures segment indicating they utilised the current fall to accumulate.
Major Option activity:
Outlook:
Due to higher volatility, focus has once again shifted to the stock option segment, which is relatively safe if we are on the buying side of the option. For instance, due to higher volatility, decline in option premiums are lower. If the stock moves in the same direction, appreciation is higher. Few above stock option has good liquidity and has seen good OI change. Overall long exposure of FIIs in the stock future segment rose to two-years high. On a net basis, FIIs are now almost 4 lakh contracts long in this segment. Hence, we feel there would be more stock specific action in the coming days. One can use the stock option segment as a preferred trading instrument till the time IVs are higher. We have already recommended a few stock option trades.
Disclaimer – I ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400 025, India, Tel No : 022 - 6807 7100. I-Sec is acting as a distributor to solicit bond related products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. Investments in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein mentioned are solely for informational and educational purpose.
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