FnO Datasheet 14-09-2011

" A scare to the 5000CE writers looks a probable option." This is what I wrote in yesterday notes. Hope you are on the right side. Here is my notes:

1. FII have net sold 23K contracts again. So, looks like they have created more shorts at the higher levels. However, one interesting thing to note is their OI has decreased from 7.32L contracts to 7.12L contracts. There are two ways to look at this. Firstly, we can consider it to be short covering. Secondly, we can consider it to be long liquidation which they have been carrying from much lower levels. As of now, let us consider it to be short covering.
2. In this series, the equity volumes have completely dried up. That is probably due to the lack of direction in the market. FII have sold 550 crore and DII have bought 44 crore of equity so far this month. Add to this - 12K crore selling by FII in the earlier month. These are not the best times for investors.
3. PCR has decreased slightly from 1.14 to 1.12. The option table has been given a complete makeover from green to red today. More than 50L contracts of Put writing happened in 5 strike prices. 4700PE,4800PE,4900PE,5000PE and 4100PE. The addition of 11L contracts at 4100PE is sure to rise a couple of eye brows. I do look at it as the frustration of PE writers considering the hardships they have been going for the last month or so. Nothing alarming - PE writers wanted to pocket some peanuts. :)
4. The volatility is causing the writers on both sides really sweat. The 5100CE writers covering the other day and today's 5200CE writers covering are examples. The volatility is operating at extremely high levels of above 30.
5. NF OI has decreased by 10L contracts. First significant short covering in the month. 
6. Do not let the extreme volatility fool you. This market is going nowhere - and is completely directionless. Institutions are making good money by writing options on both sides. To illustrate the point - NF closed @ 5003 on 30th Aug. After 15 days of trading, today NF has closed at 5019. A mega rally of 16 points. 
7. By operating via the option market, FII are making it very subtle. Consider the scenario - On 30th August, when NF closed at 5003 - the 5000PE is costing Rs.123. You write an option there - and on 8th September, it went down to Rs. 65 - approximately 50% gain. By making this buy/sell on the option front than on Future front - lesser alarms are raised for the observers. To illustrate further, add a converse transaction of 5000CE buying on 30th August and 5000CE writing on 8th Sep to the above transaction. Considering the way option data is delivered to us - we will find it as 1 option bought and 1 option sold on 30th August - and 1 option bought and 1 option sold on 8th Sep. Nothing to be decoded - except a 200% profit to the institutions. :) 
8. An important aspect to be remembered is on 30th Aug, FII OI is 5.07L contracts and today OI is 7.12L contracts. An increase of 2L contracts - remember on most of the days in between, we have traded above 5K. I would consider them to be shorts in the system at higher prices. 
9. Where do we go from here? Well, for me we will move around with the same volatility for a few more days in the range. The 16th RBI meet and 21st Fed meet might provide some direction. Another possibility is one or both the events might prove to be non-events. In any case, I would view all rallies till the earlier series high of 5174 with a suspicion. If we do cross that with conviction, we may be in for a 200 point rally from there on - considering the shorts in the system. On the downside, not much down fall is required for the institutions. Their average shorts are now working to be around 5090 mark. Any expiry below that will make decent money for them. And any expiry in the 4900-5100 zone will mean huge option premium benefit for the writers. So, the violence might increase - and wild moves might start appearing - but I do not see a clear direction appearing to the market till the closing stages of the series.
10. You can find the entire data sheet here.