FnO Datasheet - 08-08-11

Action repeat of all the earlier days. Huge gap down - market recovers for the entire day. An additional aspect for today is market fell back from the highs towards end of day.

Here are my notes:

1. Another 1.5% fall today. VIX has risen to a whopping 29 before reconciling to 26. The sell-off towards the close increased VIX again for a close at 28.5

2. As expected by CS in the trading room, FII did day trading today as well with high turnover. Their net buy of 5K contracts did not alter the OI picture. Their OI increased by another 18K contracts - further shorts?

3. Nifty Future OI has increased by 5.5L contracts. So, market cycle continues. My observation is - Institutions short - Big Bears Short - Market Falls - Big Bears Cover - Pigs Short -Institutions Cover - Market Rallies for the Pigs to get slaughtered. :) From the first impression, looks a lot of pigs shorted the market on S&P downgrade news.

4. Today is another day where we went long in the trading room from 5080-5100 range and booked from 5180-5200 range.

5. PCR has risen to 1.16. Significant increase from the lows of 0.9 earlier. The put writing is not concentrated at one strike price but scattered in the lower end from 4800-5000PE.

6. Another of my observation is.. PCR below 0.9 and above 1.3 lead to trending moves, and in between leads to range bound markets. So, after all the mayhem, we are probably returning to sanity is what is indicated by the rising PCR.

7. Last 2 days, FII traded heavily in options market. They bought and wrote options in huge quantities. This is another reason why I am suspecting a range bound market now. Remember, they are short from 5600 range - and have made the money. Even if market rises by a couple of hundred points also - they will not go into loss. So, my assumption is they will not cover the shorts in a hurry - but are playing for a range bound market by dealing in the option segment actively. Their put writing ( PCR is increasing) and call buying against their shorts will lead to extended profits for them.

8. Desi MO indicator crossed a century - price is below the lower end of bollinger band - market is extremely pessimistic -so be prepared for a short term bounce. I do not recommend buying of options at this moment, because the volatality and hence the premium of options is very high. So, it is difficult to make money even if the market moves in our expected direction. Deal with futures or option writing for some days. If it is a must that you have to only deal with buying of options then resort to day trading. :)

You can find the datasheet here.