Nifty unlikely to break 12,000, say F&O analysts

Some brokers are advising their wealthy clients to sell ‘active month’ out-of-the-money (OTM) Nifty put options expiring on a weekly or monthly basis to pocket the premiums paid by buyers. This is because of falling option volatility and the rising put-call ratio (PCR). These two measures signal that markets aren’t likely to correct below 12,000, for now, but could rather rise or remain steady.

With passing time, the 12,000 option premium — price paid by buyers — would decline substantially or completely, benefiting the sellers.

Amit Gupta, derivatives head of ICICI Direct, suggests selling 12,000 puts expiring on February 20 or February 27 as the fear gauge India Vix, in line with its US counterpart CBOE Vix, had declined significantly. As implied volatility falls, option premia tend to decline.


Chandan Taparia, derivatives analyst, Motilal Oswal Financial Services, cited rising PCR as a sign of bullishness while endorsing OTM put selling. Selling index puts involves placing margins with the exchange clearing house which is equal to the margins placed to buy or sell an index futures contract.