Nifty Expiry

I had a query from Viren last week about predicting a range or a price target for expiry.

Whilst we do not really have good reliable software like max pain to get the correct expiry figure, I have found that some good old-fashioned Option arithmetic can help predict the closing price of the Nifty fairly accurately.

I had posted this information on a public forum earlier, so those who know it already, please excuse us, but for those who do not- have a pencil, paper and calculator ready.

I intended to do this post in the morning and even communicated to Viren a closing price of 5272 ( +/ - 10 points), but got stuck in my daily routine and when I saw the close, I had to leave everything aside and do this post.

Hopefully it should help you sort out the next one...

Here are the calculations. If you are good in options, you will have this figured out...Old schoolers like us used these maths to figure out if options were cheap or expensive.

We begin by looking at the VIX and the spot closing from the day before.

Step 1 : Look at the spot price from the day before ( 5225 )

Step 2 : Look at the Vix from the day before ( 18.13 )

Step 3 : Look at the days to expiry ( 1).You can do this any number of days before expiry.

Step 4 : Divide this figure from step 3 by the nos of days of the year ( 365/1 )
You get 365.

Step 5 : Take the square root of the figure in step 4 ( 19.10)

Step 6 : Divide Vix by 100 ( 0.1813)

Step 7 : Now divide step 6 by step 5.You get 0.0094.

Step 8 : Multiply step 7 by the spot price of step 1 ( 0.0094 x 5225 = 49.6 )

Step 9 : Add and subtract step 8 from step 1 ( 5175-5275)

Step 10 :Now let’s monitor the Open interest.

Since Nifty has closed at 5225, we will look at the open interest at 5200 and that at 5300.

5200 PE has OI of 6 million and the OI at 5300 CE is of 5.6 million. In view of this, we can forecast an expiry between 5200 and 5300.This also discounts the possibility of a move to 5175.

Aligning this view with our range from step 9, we can see Nifty at the upper end of the range.The high of the day was 5268 and the Nifty closed at 5260.



That's it. 10 easy steps to take expiry blues away.

Open Interst data from 9th Feb

Here is the Open Interest table at the end of day trading on the 9th of Feb.

Put writers have taken the Open Interest at strikes 4600, 4700 and 4800 each between 4.4 and 4.8 Million shares by adding roughly about 10 % at each strike.

Infact total calls lots reduced by 3450 lots wheres put lots increased by 37450 lots day on day.

However the additon of 14.5% at 4800 in call Open Interest, indicates a tussle at this strike and the move to 4900 may not be very smooth for the bulls.

In other news, watch the news coming out of Greece tomorrow. There are rumours of a bailout by Germany flying around, yet unconfirmed at 11.30 pm IST, but may have an influence of direction tomorrow.

OI data from 4th Feb

My query in yesterday's post got answered by the action in the Nifty today, but the end of the day left behind another question about the range we find ourselves in.

Whilst the data was very clear yesterday about a down day in the markets today, I am not very comfortable in putting forward a view for tomorrow as the data throws up ambiguity.

Yesterday at the highs of 4940-4949 it was clear that the generals of the army- Reliance, State Bank of India and Infosys were not in a mood to go higher, today each was touching it's day lows as the Nifty was moving southwards.

Coming back to the Open Interest table:

What favours the bulls:

a) Exceptionally high OI of 7.4 million shares at 4800.
b) 48 K put lots were added today against 26 k call lots ( big diff from yesterday)

What favours the bears:

a) Addition of 38% and 26 % at strikes 4900 and 4800 in Call OI.
b) Bulls moving the defence line to 4600 by adding 11 % at 4600 today.

The addition at 4600 of 11 % by put writers may be sending us the message that 4800 may crumble and if it does then we reach 46xx levels in no time.

Important levels to watch for downside tomorrow are 4765-4785. Upmoves can be considered only above 4865-4870.

Open Interest data from 3rd Feb

Tuesday they took it down, wednesday they brought it up by an equal measure.

What's in store for us tomorrow? Data is pointing towards a market tomorrow, which may go down again.

After the inability to take out 4949 today ( which frankly I expected) stocks may open down tomorrow. Data posted on the blog in the afternoon and the one we have now at EOD, show the strike at 4900 increasing the call side OI ( bearish) and reducing the put side ( bullish).

Furthermore, between strikes 4400 and 5400, about 21963 call lots ( bearish) were added today whereas the same strikes witnessed a reduction in Put OI of 31343 lots ( bearish again).

The range remains 4800- 5000 as highlighted. Look for shorts below 4897 and longs above 4945.

OI data for 2nd Feb

It was an interesting day in the markets and the sell-off today would have caught many a person off-guard.

I was very interested to see what the Option Open Interest table would show at the end of the day, so I had a look at it. Here it is...


The data shows accumulation by put writers of about 33% at 4800, bringing the open Interest there to 6.96 million shares.The immediate posiibility is that of a strong support at current prices, but one must not discount the possibility that should prices hold below 4785, it will bring a strong swift move to the 200 DMA currently around 4600 levels.

The largest call OI base is at 5000 strike with 5.18 million shares.This will be a big resistence for the market to overcome should the levels around 4940+ be seen again.

The range of 4800-5000 has remained the same despite the sell-off today.

One should be playing for the bounce tomorrow.

OI data from 12th Jan

The market justified the Open Interest data from yesterday by shaving off 48 points from the Nifty Futures.

I have updated the chart with today's data which points to some more downside.The US markets are at an intersting point now ( 11.00 pm IST) and further downside there, should point to a gap down open tomorrow.

It will be interesting to watch the behavior of the 5200 PE writers in the first session tomorrow. Obviously they would expect the recent highs at 5180 levels to hold as support, but if they don't watch out below! A liquidation of the 4.8 million in OI at the 5200 put strike can bring a quick move down.