Street signs: Tyre stocks jump, eyes on Bharat-22 ETF components, and more

Option writers bleed

The unprecedented surge in the Nifty and the Bank Nifty has hurt traders, especially those into option writing. Several out-of-the-money call options on the Nifty and the Bank Nifty index jumped more than 50 times on Friday. Ahead of the derivatives expiry, which takes place on the last Thursday of every month, traders write deep out-of-the-money options. It essentially means they sell an option contract and pocket the premium. On most occasions, they stand to gain as the intrinsic value of these contracts becomes zero on expiry day. However, these strategies went for a toss as several out-of-the-money call options on the Nifty and Bank Nifty skyrocketed as the two indices surged 570 points and 2,224 points respectively. To illustrate: the value of Bank Nifty call with a strike price of Rs 29,000 expiring on September 29 surged 80 times from Rs 4.40 to Rs  350.

Good month for tyre stocks

Shares of most tyre companies have zoomed this month amid softening of prices of rubber, a key input. Leading players, including JK Tyre, Apollo Tyres and MRF, have gained 23 per cent, 12 per cent and 12 per cent, respectively, so far this month. The gains come amid a 10 per cent decline in rubber prices. The latest gains in stock prices is a reversal in trend for the industry, say experts. “The softening in rubber prices is a tailwind for the sector. We expect the replacement demand also to remain healthy,” said an analyst. 

Eyes on Bharat-22 ETF components 

Shares of most of the components that form the Bharat-22 ETF underperformed the market on Friday. Market players say shares of these companies could continue to remain soft as the government has lined up another tranche. “Traders built short positions in the ETF components ahead of the launch of a new tranche. They later subscribe in the ETF at lower prices in a bid to make arbitrage gains,” said an expert. Market players are expecting the latest tranche to be worth Rs  10,000 crore given the steep disinvestment target for the fiscal.