F&O Outlook:Call buying points to higher levels

The S&P CNX Nifty closed above the 4500 mark and is heading towards 4600. The crossover of 10-days moving average (4370) over the 40-days moving average (4326) demonstrates a bullish trend. Technical analyst Ashish Shroff of Ambit Capital expects the Nifty to target 4800 in the short term, going by daily technical studies.
 
The Nifty August futures premium advanced further from ten points to 25 points as short sellers cut their intra-day positions on account of fresh long build-up by the bull operators. The traders surrendered their intra-day positions during the trade-off session as the Nifty futures open interest increased by only 0.55 million shares despite the intra-day build-up of 4.61 million shares.

The Nifty August out-of-the-money call options continued to attract traders. Fresh build-up was seen in deep OTM calls, with the 4700 call option adding 246,500 shares and 4800 calls adding 385,200 shares in open interest.

Call sellers covered their shorts at the 4500 and 4600 strike prices as the open interest at these levels moved up marginally by 173,750 shares despite trading volumes of 10 million shares.

The buying of deep OTM calls and short covering at 4500 and 4600 strike prices suggest that derivative players expect the Nifty to trade above 4600 in the near future and target 4700 and 4800 going forward.

There was selling of Nifty August 4500 and 4600 puts as the open interest at the above strike prices increased by 143 per cent and 199 per cent respectively. The selling of puts indicates support levels as option traders take a contrary view on the markets.