By Manojh Vayalar
The October series Nifty futures started with a premium of around 150 points for the current month. For the Nifty futures FII maintained around 70% short positions, higher than the last month series, as of 10 Oct. The index has added marginal shorts since the start of this series. With short covering and some fresh longs buildup near 19,500 levels, Nifty is now in a tussle between bulls and bears. With short bias towards 19,800 levels and longs at 19,500, Nifty might witness a good movement of around 500 points with the break of either of these levels.
The VIX for the Nifty has been more or less at around 11% implying some put options sold in just out of the money strikes ahead of this weekly expiry.
FIIs started this series with Longs position in Index of around 30% vs 50% last month, which are currently around 27% longs as of yesterday. For the Nifty, the IVs for the options stayed at around 10 levels in yesterday’s trade implying lesser caution through put writing. For the Bank Nifty 26thOctober, 44000 strike put option has highest open interest implying support around 44000. For the Nifty, the VWAP (Volume weighted average price) of Nifty October Futures is around 19800 implying that to be the resistance. Below this, Nifty is to be negatively biased for the short term towards 19500.
With FIIs increasing short positions in the Index, currently higher than the last month, we expect Nifty could continue facing resistance only at the higher levels.
The ratio between Bank Nifty and Nifty is currently at 2.25, this ratio has a support at 2.20 and resistance near 2.28. We expect Bank Nifty to underperform till 2.28 is not crossed.
Sector-wise, IT, Pharma & Automobiles looks positive in Nifty.
Nifty Long strangle
Buy 26thOctober 19800 CE@ 100.
Buy 26th October 19400 PE@80
Net Premium @ 180, SLOSS @100.
Target @280.
(Manojh Vayalar, VP- Derivatives, Religare Broking. Views expressed are the author’s own. Please consult your financial advisor before investing.)
