F&O view: Put writers raise fences; market base shifting lower to 7,700

NEW DELHI: The Nifty50 reclaimed its crucial psychological level of 7,900 in Tuesday’s trade, but the shift in the base from 7,800 to 7,700 level might not please the bulls.

The maximum Put open interest of 54.31 lakh contracts now stands at strike price 7,700, which will act as a strong base for the market, options data showed on Monday. At the end of Monday, the Put open interest was highest at strike price 7,800.

Fresh Put writing was seen at strike prices 7,700 (3.4 lakh contracts added), 7,800 (1.7 lakh contracts added), 7,900 (4.2 lakh contracts added), 7,600 (2.9 lakh contracts added) and 7,500 (1.3 lakh contracts added).

The bulls would have wanted the market base to shift higher, which would have given greater confidence, but with the market base shifting lower traders have turned sceptical if Nifty can breach the 7,700 level anytime soon.

It can be taken as a cautious sign and points to consolidation in the market rather than a one-way movement on either side.

“The market is stuck in a trading range and is not able to break out the range on either side. It has to cross and hold above multiple hurdles at 7,920, 7,979 and 7,992 levels to start a fresh leg of the rally, else it may again get stuck in a trading range for the next few sessions," Chandan Taparia, Derivatives Analyst - Equity Research, Anand Rathi Financial Services told ETMarkets.com.

"Maximum Put OI now stands at strike price 7,700 followed by 7,800 while huge Call OI is intact at strike price 8,000 with an open interest of around 84.77 lakh shares,” he said.



In Call options, some unwinding was seen at strike prices 7,800 (4.09 lakh contracts shed), 8,000 (2.6 lakh contracts shed) and 8,300 (1.8 lakh contracts shed), which suggests long unwinding. The maximum Call open interest of 82.93 lakh contracts stands at strike price 8,000, which will act as a stiff resistance for the market.

“The maximum open interest in current series is visible at the Call option of strike price 8,000; while in the Put option, open interest has again shifted from strike price 7,800 to 7,700," Angel Broking said in a note. Unwinding was seen in Call options of strike prices 7,800 and 8,000, whereas in Put options, strike prices 7,900 and 7,700 saw addition of some Open Interest,” the note said.

"Since, overall FII activity remained subdued; we reiterate our view that the index may consolidate in the 7,700 – 8,000 range for the forthcoming session,” the note said.

Foreign institutional investors (FII) activity remained subdued in the equity cash segment. They sold positions worth Rs 193.49 crore in index futures with a negligible fall in OI, indicating a blend of long unwinding and short build-up.

In index options, FIIs were a buyers to the tune of Rs 1,275 crore with a marginal rise in OI. In Call options, strike price 7,900 was active and saw addition of fresh positions.

F&O Trends:

A price rise with a rise in open interest suggests long buildup. Here is a list of top stocks where long positions are building up.



A fall in price with a rise in open interest suggests short buildup. Here is a list of top stocks where short positions are building up.