F&O view: Fresh Put writing at 7,600, 7,700 levels to hold market till expiry

NEW DELHI: The Nifty50 ended a volatile day below its crucial psychological support level of 7,750 on Tuesday. Options data showed fresh Put writing at 7,600 and 7,700 levels will act as crucial supports for the index till expiry.

Fresh Put writing was seen at strike prices 7,600 (3.2 lakh contracts added) and 7,700 (5.8 lakh contracts added), which will act as crucial supports for the index at least till expiry in case the market starts breaching its support levels.

Maximum Put open interest of 57 lakh contracts stands at strike price 7,700, which will act as a strong base for the market, followed by strike price 7,600, which holds 42.30 lakh contracts in open interest.



Call unwinding was seen between strike prices 7,900 and 8,300, which suggests traders are shifting their bets to lower strike prices as the current strike prices might be trading at a lower premium.

"Looking at the options data, maximum Put OI is at intact at strike price 7,700 and fresh writing at the strike rules out any decline below the 7,680-7,700 zone," Chandan Taparia, Derivatives Analyst - Equity Research, Anand Rathi Financial Services, told ETMarkets.com.

The maximum Call open interest of 81 lakh contracts stands at strike price 8,000, which will act as a ceiling for the market, followed by strike price 7,900, which holds 66 lakh contracts in open interest.

"The Nifty50 is down by around 1.20 per cent in May series and is trading 70 points down from its volume weighted average of around 7,830 level. On the downside, Put writing would hold it above the immediate supports of 7,720 and then 7,700 and 7,680 levels," Taparia said.

The Put-Call Ratio (PCR), which shows the put volume relative to call volume, stands at 0.83. A PCR less than 1 indicates higher Call volume that Put volume. It is used to gauge market sentiment.

Put options are used to hedge against market weakness or bet on a decline while Call options are used to hedge against market strength.