FnO Data Sheet - 23-08-11

This is what I wrote in my Friday notes. "Probably a short term rally might materialize in the first 2 days of next week.

6. With high VIX and high premium on the put side ( 4900PE is priced at 95 - indicating 50point premium), probably next week might belong to grind where option premium erosion with time decay might be the theme. A surprise rally towards 5K for a scare to the uncovered call writers at 4800CE and 4900CE might be a route considered by Institutions."

Well, here we are at 4950 - On Tuesday evening.

Here is my notes:

1. 4800CE writers closed to a large extent. There is writing at 4800PE,4900PE,5000PE, 5000CE, 5100CE. Writing happening in the last two days of series - not really smart thinking.

2. Huge Short covering happened in Nifty Futures. Approximately 40L contracts are closed today. So, today's rally is more driven with short covering than genuine buying. Short covering makes the market go up, but it weakens the market as well.

3. FII bought 20K contracts today. However, their OI has decreased by 7K contracts only. So, they did not cover the shorts in bulk. Further, the turnover today has been on the higher side. So, they did a lot of day trading.

4. On the options front, finally there is some reduction in the OI today. The profit booking at 4600PE is probably a result of this. I said on 10th August, FII hold huge option written positions and we may be in for grinding with volatility. At that time, 4900PE+5200CE together costed 240 points. At the trading room, we have sold the straddle. Today, the straddle is 28 points. 200+ Point profit in 10 days.

5. This series initially has been quite painful for the writers. You can see that the maximum OI at any level did not cross 70L at any time. In July, the OI has crossed 1 crore at 4-5 strikes. That indicates the fear gripping the option writers. However, the big institutions did make money on writing as well due to the high volatility.

6. So, finally where do we expire? 5000CE has the highest OI at 70L. 4800PE has highest OI at 59L. One of them will face the heat. Look out for tomorrow. If NF crosses and sustains above 5K, we may reach Vinod's 5110. Else, RM's 4765. :) Any way, the numbers are for fun. I do not believe in making predictions in Numbers. I try to only guess the direction and intensity of the move.

Watch out, such an activity filled month may not go into history with a tame end!!

You can find the entire data sheet here.