Traders turn gaze on Nov contracts

F&O OUTLOOK

The Nifty put-call ratio of the open interest (PCR OI) is at 0.67, down from the previous week’s level of 0.73. The PCR OI below one indicates an oversold position in the market. However, a significant OI in Nifty put options has been built up through buy options rather than writing of puts. This indicates that one should not read the PCR below one as an oversold position.

On Friday, the market opened a new channel for options traders by allowing trade in the 3,050 strike put and call options. The 3,050 strike call options witnessed a volume of 6,800 shares at a premium of Rs 168 a share. However, volumes were significantly high at 539,400 shares at the 3,050 strike put at an average premium of Rs 110 a share. Low volumes at the 3,050 strike call options indicate that traders are not taking a risk of paying a high premium when volatility is as high as 70 per cent.

Of the total traded volume of 539,400 shares at the 3,050 strike put, 165,000 shares were carried forward as OI with a premium rising from around Rs 40-50 to Rs 150 at close. An increase in the OI at the 3,050 strike put is mostly through buy contracts, indicating that put buyers expect the Nifty to trade around 2,900.

With ten trading days left for expiry of the October contracts, futures and options (F&O) players were seen shifting their position to the Nifty November futures, which traded at a premium of 21 points over the Nifty October futures. The November futures added an OI of 480,150 shares, taking the OI to 4.43 million shares from 1.88 million shares during the same time last week. Looking at the current market conditions, it is very difficult to indicate the status of carry-over positions.

The OI in 188 stock futures declined on Friday, showing that F&O players are wary of carrying forward their positions in uncertain market conditions. The OI in Suzlon Energy, IFCI and IBN-18 has declined by over two million shares each, while Chambal Fertilisers, HDIL, Development Credit Bank and IDFC shed an OI of over 1 million shares each.