With open interest scaling new heights every expiry, there is no denying the large interest the expiry week holds for traders trading on the NSE.
Let's look at what the Nifty has done this month of August from the first trading day since July expiry.
The blue shaded region represents value area for this series.
As we can see that price is currently above value area, implying that buyers are strongly in control of this tape.
5467 represents developing value area high and 5433 the POC, both values which we have talked periodically for the past two months.
They will have a role to play in the future too. So remember them.
Based on the above chart, we are set to expire above 5467 levels.
We will look at this chart on Wednesday at the close.
Here's the bank Nifty :
This index confirms the action in the Nifty. Same inference. Watch the VAH & the POC.
Looking at the same chart from a weekly perspective, we get an idea of how strong this index has been.
Value has been building steadily higher.
The conservative trader will never attempt shorts above value area high. If you do want to short take a small position when value high is broken and add when value low breaks convincingly.
If it doesn't it best to reverse and go long and with the trend, as can be seen in the shaded regions.
To close let's look at the Nifty weekly:
Certainly not as strong as the Bank Nifty, but that large value area in that last week tells us the the longer time frame player is getting active in the index and we may see a move ( much of it happened already) after a lot of sideways action.
Enjoy your week-end.
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4 comments:
THe overheavy PCR and option is probably Pe protection buying on long nifty positions.
However the Ce shedding on Friday could possibly be booking of profits by Ce writers.
Moot imponderable is not whether expiry is above 5467 or not; Rather the qestion beget answer is "whether we close below 5500 or above ? who will eat the premium on strike price 5500 - the Ce or the Pe writers ?"
NO one has a clue.
Well alphabet1 -- I have seen the market makers take the easy solution in such times. And the easy solution is -- Expire at 5500 or 5500 +/- 20 points.
Last two expiries had pretty big OIs at particular strike (5300 for June & 5400 for July) that as Shai puts it "never got resolved" till last day.
There were other notorious expiries at even numbers --
Nov 2009 -- Exp @5000
Dec 2009 -- Exp @5200
May 2010 -- Exp @5000
The only way bearish view comes into picture is if market comes down below 5445 and simultaneously the 50L 5500PEs written in last 3 days unwind. I doubt that will happen.
So my bet is on expiry @5500 +/- 20 -- 5480-5520
Saw one decent recommendation from Karvy:
Sell a 5500PE and 5500CE -- for cumulative premium of 66 rupees and sleep peacefully till 5434 or 5566 is crossed.
Only beyond these levels the losses start. Max profit can be 66*50 rupees if expiry happens exactly at 5500.
http://www.4shared.com/document/smlas5sp/_2__MySAR_A__Future_for_23th_A.html
Scripts to watch today : Bhartiatl, Bhel, HCL Tech, Infosys, JPAsso, LT, Maruti, ONGC, Ranbaxy, Reliance, Rcom. RelCap, Rel Infra, suzlon, Tatapower, Tisco, Unitech, Wipro.
Just so that my analysis should not be taken as pessimistic - I will post one scenario where we can expire above or close to 5600:
Maximum number of 5600 calls are written below 25 rupees - so they might be willing to cover as they are all in decent profit. And maximum number of 5500CEs are added above 55-60 range. Currently trading at 49 - so if some more short covering is forced even the 5500CEs can give way.
So in next two days if 20L 5500CEs cover and about 15-20L 5500PEs are written then we can get closer to 5600 and the band just shifts from 5500 +/- 20 to 5600 +/-20
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