Which strategy are traders deploying at 18000 levels?HDFC - 2288 Change: 50.25 (2.25 %)
Commentary:Sectoral rotation in terms of price action is clearly visible in this current leg of consolidation. Selling in banking and other heavyweights is being compensated by buying in auto, technology select pharma and power stocks. Volatility remained subdued near the 16% mark. In contrast, despite a rise in the Dollar Index due to US retail sales, which increased against the odds, the rupee appreciated. Hence, no major volatility is expected from the forex market.
Major Option activity (Weekly):
Major Call OI change in today’s session: 18000 (23.5 lakh), 18100 (4.5 lakh) and 18200 (3.5 lakh).
Major Put OI change in today’s session: 18000 (12.5 lakh) and 17900 (28.5 lakh).
Outlook:The Nifty is clearly facing a hurdle at higher levels and failing to sustain above 18100. Performers like Reliance Industries, HDFC Ltd and Larsen & Toubro witnessed aggressive profit booking in the previous session. For the current week, aggressive Put writing happened in 17900 strike whereas Call writing happened in the 18100 strike. Today highest OI additions were observed in 18000 strikes and due to elevated premiums it is still commanding Rs.150 premium. We feel traders are deploying a short Straddle strategy to benefit from the elevated premiums and declining time value of options. Going ahead, the Nifty is likely to trade in the range of 17900-18100. From current levels, one can short 18000 strike Straddle for November 18 expiry.