Huge call selling seen in Bank Of Baroda, SBI ahead of Q4 earnings
SBI’s PCR was 0.51, while that of BoB was 0.56 on Wednesday.
By Ram Sahgal, ET Bureau | Updated:
MUMBAI: Options traders sold significant quantity of call options of SBI and Bank of Baroda on Wednesday. This has caused the putcall ratio (PCR) of both stocks to fall sharply just ahead of their quarterly results. SBI’s PCR was 0.51, while that of BoB was 0.56 on Wednesday. This can be interpreted in two ways. While buyers expect more upside post results, sellers of the options believe a correction could be around the corner.
However, if the jump in the recent outstanding positions and price movements are indicators, the sellers seem to hold a slight edge over buyers. Maximum positions on SBI calls expiring on May 25 are at the Rs 310 strike.
The number of shares outstanding at this strike jumped 36% overnight to 63.39 lakh shares on Wednesday. Simultaneously, the option’s price fell by 3% to Rs 6.05 a share, giving the sellers a miniscule edge over buyers.
In BoB’s case, maximum open interest is at the Rs 200 strike call for May 25 expiry. Traders’ open positions jumped by 24% overnight to 28.2 lakh shares as the price per share dipped by 8%, giving that much of an unrealised gain to the option seller.
BoB will report its numbers on Thursday and SBI on Friday.
Both the stocks have run up substantially on anticipation of strong performance. SBI hit a 52-week high of Rs 308.8 on Wednesday before closing flat at Rs 307.05. BoB hit a 52-week high of Rs 202.5 earlier this month. The stock closed at Rs 192 on Wednesday.
While a call option buyer bets prices will rise, the call seller bets that price won’t rise above the strike of the call sold plus the premium (price) received from the buyer.
Bloomberg consensus estimates SBI’s Q4 net to jump about 90% from a year ago to Rs 2,390 crore. BoB is expected to post a Rs 477-crore profit against a year ago loss of around Rs 3,231 crore.
If the buyers prevail, it will force the sellers to cover their shorts driving up the prices of the stocks. If the actuals miss the consensus estimates, sellers will laugh all the way to the bank.
However, if the jump in the recent outstanding positions and price movements are indicators, the sellers seem to hold a slight edge over buyers. Maximum positions on SBI calls expiring on May 25 are at the Rs 310 strike.
The number of shares outstanding at this strike jumped 36% overnight to 63.39 lakh shares on Wednesday. Simultaneously, the option’s price fell by 3% to Rs 6.05 a share, giving the sellers a miniscule edge over buyers.
In BoB’s case, maximum open interest is at the Rs 200 strike call for May 25 expiry. Traders’ open positions jumped by 24% overnight to 28.2 lakh shares as the price per share dipped by 8%, giving that much of an unrealised gain to the option seller.
BoB will report its numbers on Thursday and SBI on Friday.
Both the stocks have run up substantially on anticipation of strong performance. SBI hit a 52-week high of Rs 308.8 on Wednesday before closing flat at Rs 307.05. BoB hit a 52-week high of Rs 202.5 earlier this month. The stock closed at Rs 192 on Wednesday.
ADVERTISEMENT
While a call option buyer bets prices will rise, the call seller bets that price won’t rise above the strike of the call sold plus the premium (price) received from the buyer.
Bloomberg consensus estimates SBI’s Q4 net to jump about 90% from a year ago to Rs 2,390 crore. BoB is expected to post a Rs 477-crore profit against a year ago loss of around Rs 3,231 crore.
If the buyers prevail, it will force the sellers to cover their shorts driving up the prices of the stocks. If the actuals miss the consensus estimates, sellers will laugh all the way to the bank.
Too busy to trade in stocks? Invest in Mutual Funds with ET Money!
Bookmark or read stories offline -
Download ET Markets APP
Download ET Markets APP
ADVERTISEMENT
