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Option positioning on weekly expiry day

Commentary

The Nifty started the current week on a dismal note but witnessed a V-shaped recovery and moved above 17400 levels. However, no reversal in the volatility index, which is still at elevated levels and sustaining above 21%, is a worrying sign. FIIs have continued to remain negative in the cash segment for a few weeks now. Since, today is the weekly settlement, we have seen sharp swings on both sides.

 

Major Option activity (Main expiry):

Major Call OI change in today’s session: 17400 (38.5 lakh), 17300 (10.5 lakh) and 17500 (49.80 lakh)

Major Put OI change in today’s session: 17300 (32.9 lakh) and 17200 (31.77 lakh).

 

Outlook:

Despite sharp whipsaws in recent days, the Nifty has managed to sustain above 17300 in today’s weekly settlement. Throughout the week, the Nifty witnessed writing in 17500 strike Call, which remains the key hurdle levels. We do not expect the Nifty to settle above this level in today’s session. However, due to aggressive Put writing and the way the option premiums have eroded since morning, we feel the Nifty is unlikely to violate 17300 levels. A dip towards 17300 would be a buying opportunity whereas we expect the Nifty to settle near 17450 levels. Supportive actions are expected from metals, auto and heavyweights like Reliance Industries, Larsen & Toubro and the HDFC group.