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Stuck-up Call writers should trigger short covering in second half.

Commentary:

Since the past two days, major indices witnessed sharp pull back from lower levels where both Nifty and Bank Nifty managed to surpass there sizeable Call bases. Nifty in particular saw almost 90 lac shares OI addition in 17400 and 17300 Puts combined and now the highest Put base for today’s settlement stands at 17400 which remains the support.

Major Option activity (Weekly):

Major Call OI change in today’s session: 17500 (56.7 lakh), 17600 (32.9 lakh) and 17700 (42.8 lakh).

Major Put OI change in today’s session: 17400 (45.87 lakh) and 17450 (24.32 lakh).

Outlook:

FII’s which was shorting aggressively since November has decreased there quantum. Yesterday it was the lowest figure since 17th November. Global volatility has cooled-off as US VIX fell below 20% again from its recent high of 31 and similar trend was seen in India VIX which fell below 17% in today’s session. The Put to Call OI ratio is rising which is a positive sign as more writing is happening in Puts. Today we had seen huge Call blocks in ATM and OTM strike Calls however, as Nifty took support near 17400 levels, the Call writing OI started declining. From 81.5 lac shares it is now only 56.7 lac shares in 17500 strike. Closure in this Call writing positions should help Nifty to head towards 17600-17650 levels whereas Bank Nifty should head towards 38000-38200 levels.