FnO Datasheet 19-10-2011

My notes:

1. We have a 2% rally on NF, almost breaking the perceived trading zone. This is the 4th closing above 5110 in the last six trading days. Everyone in the trading room knows the importance of 5110. :) Will this be a sufficient requirement for us to proceed to the conquering the all important 5200? Let us see.
2. Shorts really ran for cover today. 12L contracts in NF have been covered today. I remember one of the early lessons in the trading room by Shai - "Short covering leads to a price rise. But, it weakens the market internally." I do not see much buying happening. So, is market structure weakening? We will know in the next 2 days.
3. Though FII have bought 10K contracts, their OI has increased only by 4K contracts. So, we have to assume that, they have covered shorts of 6K contracts. Now, NF has reduced OI by 12L contracts. So, FII could obtain a short covering of 12L contracts for their 6K contract short covering. Amazing leverage. :) Leaving jokes apart, I feel that, there is a serious mismatch between the FII and the other traders on the direction of Future of Nifty Future. :) Who has more chances of being right? Take your call.
4. Turning to equities springs another surprise. For a rally of 100 points on NF, both the FII and DII turned out to be sellers in the equity segment. That indicates that, this rally is done via short covering only and ... is limited to FnO segment.
5. The option table paints a bullish picture. Lot of call covering at different strikes, and mammoth put writing. The most interesting part is the put writing at 5100 and call covering at 5000. 5000CE covered approximately 10L contracts. There has been a writing of 6L contracts at 5300CE. So, bears are not confident that 5200 also can hold the bull rally. For me the defining part is 24L contracts being written in 5100PE. If we look into the last 3 days, each day 5100PE has been the focus. Yesterday, after covering 18L contracts, it looks the bulls are back with a vengeance. Is their bullishness justified? Looks a lot of people are playing for a Diwali rally.
6. The troubling part for me, is in the correlation between the option table and the Institution data. The data sheet shows that, FII bought more options today than writing them. It is perfectly plausible to opine that, their option buying has to do with 5000CE and they are covering their loss. However, the other alternative is if they are buying the 5100PE. We will soon know.
7. Where do we go from here? Our SAR number is at 5106 - quite close to Vinod's 5110. Stay long above it - and stay short below it. It is working quite well.  
8. It is alright to play for the Diwali rally - historically, it is a proven thumb rule. However, remember that the bus is getting crowded. Additionally, it is important to remember that, we are in the midst of a rally, which is only happening in the FnO segment. There is no corresponding equity buying at all.
9. The complete datasheet is here.