Tag Archives: Futures and Options

Market Trade Setup 21st February

After 8 days of continues fall, finally we saw a sharp rally yesterday, especially in the last hour and what we saw was a 130 point rally that took Nifty above 10720 and closed at 10735. For last 2 days I was talking about Nifty conquering 10700-10720 mark and that finally happened yesterday. The options data from the weekly series of Nifty also indicated 10800 as the roof and we are going there. Globally things are looking fine with Dow Jones closing in 60 point positive zone but the Asian markets are trading in the mixed zone with Hong Kong in mild positive while China and Japan are in mild red. The bad news is on Brent crude which has climbed to 66.8 dollars and now a touching distance away from 67 dollars. 
On the domestic front, the Pulwama news is digested, the people responsible were eliminated and market seems to have put that news behind. The big news however is the PSU bank recapitalization that was announced and that has led a rally in many PSU banks with IDBI bank going up 3% and SBI, Canara bank and Syndicate bank gaining between 2 to 2.5%. Corporation bank and allahabad bank got the highest recapitalization of 9000 Cr and 6900 Cr respectively. Lets see how these two stocks react today.  On the technical side we have crossed the 100 day moving average of 10690 yesterday and next we have the 20 and 50 day moving average of 10820 and that will be a resistance point to watch out for.
On the derivative front, today is the weekly expiry for the Nifty and yesterday itself we have seen a lot of reaction with 9 lakh crore turnover on Index options and the overall derivative turnover of 10.1 lakh crore. We have to see if we can see another 20 lakh crore turnover or not today. 10600 put has the maximum open interest of 15.3 lakh positions and 10700 also has 11.9 lakh positions so today if we break 10690 by chance then we have the chances of going to 10620 mark. On the call side 10800 is a firm resistance and that would be maintained at any cost. For the monthly expiry series the Nifty put call ratio yesterday jumped from 1.11 to 1.30. I had indicated that there would be a rally, as the PCR has gone really low. 10400 put and 11000 call continue to have maximum open interest for the 28th Feb expiry. 
What is the Nifty call for the day?

Yesterday, I was talking about a mild rally which can take Nifty to 10700-10720 mark and what we got was a rally that took Nifty to 10735 mark. If you had taken positions yesterday, you would have made mild profits and would have closed the positions yesterday. If you had not taken any position, strictly following my advice that 10650 was not reached, then no problem, today you will get an opportunity again. A mildly red Asia and rising Brent Crude prices means we will open a bit down today around 10670-10690 mark and that presents you with a fresh opportunity to enter into a long position again. Make sure that Nifty doesnt fall below 10650 mark till 10.30 then go long around 10680 mark with 10730-10750 as a target. If by any chance the target is not reached and Nifty stays above 10660-10680 mark then keep your positions intact and take it to tomorrow.

Market Trade Setup 20th February #Nifty

Market Setup 20th February

After a great start, when we all thought that we might escape a fall and close at 10700 level we saw the classic last hour fall of nearly 120 points that took Nifty to below 10600 and due to the averaging of values we closed just above 10600 mark at 10604. This marks the 8th consecutive fall and we have not witnessed it for a long time, not in last 4-5 years! Are we going to see another one today or is the pain over for now? World markets are mixed with Dow Jones closing totally flat with a gain of just 8 points while Asian markets are showing a lot of positivity with Hong Kong up close to 350 points and Japan up 150 points and other markets in 0.5 to 1.5% up. 

On the domestic front, Crude seems to be emerging as a worry as Brent is now at 66.5 dollars. This will put some pressure on the rupee and in the domestic market also the petrol prices are being revised on the upside. Last 4 days saw 60 paise rise in Petrol prices in Hyderabad and Petrol now stands at 75.34. On the macro front, GDP figures are going to be out in a week’s time and going by the Q3 results things look bleak and there is a fear that GDP which grew at 8.2% in Q1 is likely to drop below 7% in Q3 and that will act negatively on the market. On the political front, the developments on Pulwama and the political statements that the leaders make will have to be watched very carefully. 

On the derivatives front, yesterday was the story where neither in futures nor in options we went anywhere. The Morning saw a lot of buying in Futures but everything changed as Nifty started to fall. The long positions still remain at 45% and the Nifty put call ratio fell a bit to 1.11 vs 1.13 seen at the beginning of the day. This is a level where puts will get demand and that means markets should go up. Tomorrow is the weekly expiry of Options and on the put side 10600 has the maximum open interest and 10800 call has the maximum open interest which means that there is some scope for a rally. On the monthly contracts however 10400 put and 11000 call has the highest open interest. 10700 put and 10800 call are also gaining open interest and we need to watch them. 

What is the Nifty call for the day?

Yesterday, if you have thought that you missed a good chance to make money, you would have heaved a sigh of relief by evening that your money is safe in your pocket. This is the nature of the market now and taking risks comes at a huge cost. With a 10670 open and 10710 seeing selling you really wouldn’t have any chance to enter or exit. Today we will see a positive start again due to positivity in Asia at around 10630-10660 levels. What happens after that needs to be seen. If 10620-10650 range is protected in the first hour, then take a small risk and go for a long position with 10700-10720 as the target, whenever it comes. You might take it to tomorrow also if targets are not met today. Make sure that your entry point is between 10620-10660 mark so that the profit you get is meaningful and take this position only if 10620 is not broken. If it is broken, and Nifty goes below 10580 then stay away.

Market Trade Setup 19th February #Nifty

Market Trade Setup 19th February
The second half of expiry starts off on a disappointing note when the whole world was rallying. Nifty lost nearly 70 points and closed below 10650 which is below all the moving averages, the 20, 50, 100 and 200 dma. The last standing value was 100dma of 10690 which was emphatically broken yesterday. There was no doubt that we were on a downward spiral but where exactly it ends needs to be seen. Yesterday US markets were shut due to President’s day and today Asian markets are in mild green with Hong Kong 60 points and Japan, Shanghai and Korea are absolutely flat. Brent Crude seems to have stabilized at 66 zones and its trading at 66.1 dollars now.
On the domestic front, the big news is the RBI interim dividend of 28,000 Cr given to the Govt. There is a big debate going whether the new RBI Governor was too kind to Govt but if you look at the history the 3 years of Rajan saw an average of 60,000 Cr and its only after that we had some dividend kept as reserves. But now the question is should any money be kept as reserves or the entire excess amount be given to Govt. The conclusion is its left to RBI to decide. So, this fiscal Govt got 78,000 Cr with 50,000 Cr coming in August and 28,000 Cr coming now. In other news, Ambuja cements one of the last companies to come up with its Q3 has disappointed and thus officially the Q3 calendar is over for now.
On the derivatives front, there was selling yesterday also by FIIs and now in the last 6 trading sessions, FIIs were sellers. The overall long positions now stand at 45% for Nifty and on the options front there was a massive demand for calls and that took the Nifty put-call ratio to 1.13 from 1.30. Now we have been falling from the last 7 trading sessions and we lost 430 points in last 7 sessions. Now 10400 put has established itself as the strike with highest open interest as 10700 put which was ahead of 10400 lost 5.1 lakh contracts in unwinding. On the call side 10800 call is also picking up open interest and soon we might have 10400 as the support and 10800 as resistance for Nifty.
What is the Nifty call for the day?

We can’t look at the world and trade because the market is on such a downward spiral that you have nothing to trade as a bull. Now with no moving averages offering support, the only support zone we can look at is 10530-10550 zone which are the lows that Nifty made on December 11th when BJP lost all three state elections and on 26th December. Now we need to see whether we find support there or not. For today we might open between 10650-10670 and if there is shorting at 10700-10720 zone we will fall again. Yesterday’s low of 10620 might offer as a support. If that doesn’t hold then we are on our way towards 10550 zones. Today also its AVOID and see whether Nifty stabilizes or not. Stabilization is when Nifty closes in 10680-10700 range.

Market Trade Setup 18th February #NIFTY

Market Trade Setup 18th February

A nervous weekend comes to an end and we are back to the second half of this shortest expiry monthly series. Nervous on what will happen at the borders and nothing big has happened and that is the good news as well as bad news. Good news because we will still work on the other known cues to predict the markets and bad news because uncertainty and pressure will continue in the markets and so everything will be approached on a doubtful note. Meanwhile, the positive news on the US-China trade talks pushed up the US markets which rose by a massive 440 points. That rubbed off on the Asian markets also today and Hong Kong is up close to 500 points now and Japan is up 370 points and all the other Asian markets are trading in the green. 

On the domestic front, OPEC has further cut the crude production and that has pushed the crude oil from 65 dollars at the weekend to 66.2 dollars and that would be one of the reasons why Nifty might not go up as much as other markets today. Added to that we have the big domestic factor of Pulwama attacks where Govt has not taken any concrete steps against Pakistan except warning them, which will weigh on the minds of the markets. RBI has pulled up Yes bank for revealing the confidential letter that it sent them about the no divergence and it is nothing short of a breach of trust and confidentiality norms. Today you might see Yes bank stock in the pressure again. On the Q3 front, results season has almost ended and today Ambuja cement is only the major company up with their Q3. 

On the derivatives front, Friday saw a lot of short positions getting built on the Nifty Futures and with that, the overall long positions fell to 47% at the end of the day from 49% at the beginning of the day. On the options front also, the Nifty put-call ratio dropped to 1.30 from 1.35, even though markets recovered at the end of the day on Friday. 10400 put added maximum contracts of 2.6 lakh followed by 10500 put which added 2.4 lakh contracts and 10700 put 1.7 lakh contracts. All the other Strikes shed open interest. 10700 put has highest open interest at 32.1 lakh positions while 10400 put is close behind at 31.3 lakh contracts. So, any fall below 10700 today might take Nifty towards the 10400 mark and this is something that traders should closely observe. On the call side, 11000 call is acting as the roof to the market. 

What is the Nifty call for the day?

Despite a positive Asia, we might not open that positive today because of the crude and the domestic factors and we could see an opening between 10730-10760 mark with a maximum upside potential of 10780-10800. I had stopped you from taking any positions and Friday but on Thursday I asked you to go long at 10720 levels. If you had taken that position, today is the best time to exit. Exit this position anywhere between 10770-10790 levels and see what market does. On the down side 10620-10650 might act as a support to the market. Today is also a no trade day for me as we are going through a severe pressure from within for whatever positive factors that are occurring globally. If today Nifty closes above 10750 then we can look at some trades tomorrow.

Weekly Expiry for Nifty – A New Chapter in Equity Derivatives for India

Weekly Expiry for Nifty – A New Chapter in Equity Derivatives for India

Today’s post I will take you back to the controversial aspect in the Stock Market for the majority of Indians. We have already seen in the previous posts of mine on what are derivatives and how they are traded and also how they help the investors to cut down the losses.

Though that’s the main reason for derivatives being introduced, the agenda has completely changed and we see more traders than investors in today’s market. But let me tell you that the number of traders that we see in our Indian Stock Market is much less when compared to Stock markets like America, Europe, China and Japan. For your easy understanding, India’s population contributes to almost 20% of world’s population whereas the Indian Stock Market derivatives trading contribution is at laughable 0.5% of 100%. That’s the fact which would hit us badly but that’s the reality.

Reasons for not trading are many, some are technical while some are due to fear. There is no need to fear or worry, derivatives if learnt properly is very easy and very profitable indeed. Let me tell you the story of derivatives in just 3 simple points:

1. Unlike stocks, where one person’s loss is another person’s gain, derivatives trading is something where everyone can gain or everyone can lose. In simple terms, if you want to buy something you need not have a seller and vice versa. So, in derivatives, if you feel that you can make profits, everyone can buy and everyone will gain money. Thus wealth is created in Options contracts of derivatives. Otherwise also in equities, if we see the loss made by one person is the gain for another person. But the derivates markets are different, here both the traders can make profits at the same time. It’s because of this derivatives market that the world was able to fund the internet and technological revolutions.

2. In Indian till last month, there were monthly expiry Futures and Options contracts. And as we are in the European options methodology, a trader has to wait for the end of the month to close transactions and get the money into the bank account. This limits him from trading very frequently and you would also have to wait till the last day to get your money. But now from this week, Nifty weekly contracts were introduced and the first expiry will happen on 14th Feb. Now the trader can get the profit he made in his account every week and that is a major advantage of weekly expiry. This will surely increase the volume of the contracts traded.

3. The Last point we need to look at is why the derivatives are so low in India? It’s just 0.5% of the total volume of derivatives across the World. Even in that, 90% of derivatives volumes come from equities that mean other derivatives take just 10%. Whereas if we look at the USA derivatives markets, in the OTC category 77% of the derivatives volumes come from Fixed Income derivatives, 9.3% comes from Currency and 8.3% from Credit, 3.5% from equities and only 1.3% come from Commodity derivatives. So if we look at our derivatives it’s a complete monopoly, with no other instruments able to pitch in and increase the derivatives contribution.

India has a long way to go. First, the volumes in equity derivatives have to increase, then other instruments like debt, currencies should be tried. Derivatives are simple and easy if you really want to learn to multiply your money, make a small effort of learning it because the future for Indian Stock Markets is Derivatives Market!

Market Trade Setup 15th February 2019 #Nifty

A tough week is coming to an end with a very sad news coming from pulwama where 44 of our brave soldiers were martyred in a suicide attack of terrorists from across the border. India has promised a befitting reply at a place and time of its choosing. This brings a lot of uncertainty into the market which will be worried about the kind of reaction and its consequences. Globally also things are not looking good where growth fears are back again and Dow Jones lost 100 plus points last night. Asian markets are in red with Hong Kong down 400 points, Japan down 250 points, Shanghai and Korea in mild red and only Taiwan in flat to green. Brent crude is also a cause of worry which is now at 65 dollars which in a week gained 4 dollars. 

Domestically, Yes bank was a star performer yesterday with a largest ever intraday gain for itself of 31%. Imagine a stock going up 31% on a single day, that’s what one clean chit from RBI can do. Another positive we can look forward to is the Jet Airways restructuring plan. Finally a restructuring plan seems to have worked out where the majority of 51% of stake in Jet will be held by the promotors and Naresh Goyal whose stake is 51.5% now is like to come down to 25% and Etihad which has 24% stake is likely to come down to 12%. Q3 results seem to be mixed with Nestle disappointing again, for Nestle which follows calendar year its Q4 results. Pharma company Glenmark was a relief which reported 11% rise in sales while MTNL, Jet Airways, Voltas were a disappointment. 

On the derivatives front, yesterday was Nifty weekly expiry and there was so much selling yesterday even in the monthly series that the long positions which were at 55% came down to 49% by evening. This is something which is very rare. Contrary the Put call ratio went up to 1.35 from 1.29 on the back of short put positions that got created. The first weekly expiry on Nifty and Bank Nifty clocked 15.89 lakh Crore turnover which is almost equal to the monthly expiries. So, the expectations that volumes will go up has actually come true. 10600 put added 3.8 lakh contracts and 10700 put added 3.5 lakh positions and 10700 put now has the highest open interest which means 10630-10650 is the support for this month. On the call side 10800 call added 8.2 lakh positions and 11000 call has the maximum open interest. 

What is the Nifty call for the day?

Today is Friday and the cues across the globe are not that good. Even the domestic situation is challenging with market worrying what kind of retaliatory action India will come up with in pulwama. Brent crude also is at 65 dollars and all that means we will open in 10740-10760 range and we need to see if 10750 holds or not. If 10720-10750 doesnt hold and Nifty slips below that before 12 then its a warning sign to stay off. I know that you have not traded for almost a week but these are testing times and we need to hold on and wait for the right opportunity. If by 3PM also Nifty manages to hold 10720-10750 then you can venture into taking a long position, but remember that a lot can happen over the weekend in Kashmir which will have an impact when we open again on Monday. So, its all looking very risky indeed.

Market Trade Setup 12th February 2019 #nifty

Market Trade Setup 12th February 2019 #NIFTY

A weak start to the week is what we have seen yesterday. The 125 point fall on Friday was followed up with another 50 plus point fall yesterday and that took the Nifty back to sub 10900 levels and now worries are emerging where the Nifty will go from here. Last night Dow Jones also corrected 50 points on the back of non resumption of US-China trade talks and the US Govt Shut down that’s gone into 7th week now. But the main factor remains the worry that the US might go into recession in the last quarter of 2019 or early 2020 which is what is being predicted by many analysts. Brent Crude still remains below 62 dollars and Asian markets are mixed today with Japan Up 400 points and Hong Kong down more than 120 points.

On the domestic front, Q3 results continue to disappoint, especially the automobile sector. Eicher motors came with disappointing numbers and they have reduced the guidance for this year. The effect is shown on the auto ancillaries also where Amararaja batteries has slipped to single-digit growth and now projecting a sub 5% growth for the coming year. Apart from that, some macro data is also expected today with December IIP numbers coming today. It is expected to be in 2.2-2.7% range which is better than 0.5% seen in November. The January CPI inflation data is also coming today and December saw overall inflation at 2.1% and services inflation at 5.7%. This month I am expecting it to be in 2.0 to 2.4% range with services inflation falling a bit to 5.4-5.6%. Both the data will come at 5.30PM today and we will have their impact on Nifty tomorrow. 

On the derivatives front, the first day of the weekly Nifty option had received a fantastic response with 38.8 lakh open interest on call side and 31.1 lakh open interest on put side. That means the put call ratio will be less than 1 but that is mainly because Nifty closed in red yesterday. 6.3 lakh contracts got created for 10800 put and 9.7 lakh contracts got created for 11100 call. So, this week we are looking at 10800-11100 range for Nifty. But if we look at the Feb series the highest open interest on put side is at 10400 level and on the call side, it is at 11000 level. The Nifty put-call ratio fell further from 1.59 at the beginning of the day to 1.47 at the end of the day. Index options saw 4.4 lakh crore turnover yesterday taking the overall value to 5.46 lakh crores. 

What is the Nifty call for the day?

We need to look at the Nifty movement from weekly as well as monthly point of view. For this week, support comes at the 10800 level and the upside goes all the way up to 11100. We might open today on a flat to negative note around 10860-10890 levels and 10820-10850 is a strong support zone. If Nifty goes there then it will present a good opportunity for you to take a long position with 10880-10920 range to exit. The target can be reached today or tomorrow. If Nifty goes below 10820 and 10800 then do not take any long positions. Longs should be taken only if Nifty holds 10820-10850 range.

Market Trade Setup 11th February 2019 #NIFTY

Market Trade Setup 11th February 2019 #NIFTY

We are back to the 2nd week of this shortest month after a big 125 point fall on Friday, erasing almost all the gains made during the week. This week starts off with a big warning from IMF Chief Christine Laggard saying “When there are too many clouds it takes one lighting for the storm to commence”. Added to that fact state, an economic monitoring agency has forecasted a contract of earnings of more than 1% in the 1st quarter of 2019. All that has started to impact the market and the US-China trade talks not going anywhere, there is dullness all over. Most of the Asian markets that were shut for one full week on the back of Lunar new year of China have opened today and are trading mixed. 

Coming to domestics, there was a big fall on Friday on the back of disappointing news from the Q3 front. Tata Motors was a big disappointment and things are looking very bad for many companies. Debt has become a bad word today and any company which has more debt than it can manage is seen collapsing. The classic example is the pack of ADAG stocks and stocks like Escorts, Tata Steel, M&M etc. Almost all the auto stocks have cut their guidance and this spells doom to the automobile sector. The Q3 results are in its last stage and following are results expected today: Amararaja batteries, Andhra bank, Century textiles, Eicher Motors, Hindustan copper, Max retail, Motherson Sumi, Spicejet and Virinchi.

On the derivatives front, there was a huge selling in the Nifty futures on Friday and that took the overall long positions to under 50% again and now they are at 49%. On the options front also, lots of short positions were unwound on put side taking the Nifty put-call ratio to 1.59 from 1.82. 11000 put shed 7.3 lakh positions while 10900 lost 7.2 lakh positions and 10500 put lost 6.4 lakh contracts. 10400 now has the highest open interest which is scary. 10700 is close behind it. On the call side, 11000 call added 6.7 lakh positions and it has the highest open interest. Another news is weekly options will kick off from today and Nifty and from today we will have the first weekly options opening for 14th February.

What is the Nifty call for the day?

This is a very uncertain market and Friday’s fall has established that strongly. I cautioned you from trading on Friday and am sure you would be feeling happy about your money being in your pocket. Looks like even today you have to keep your money in your pocket itself. Nifty is likely to open around 10920-10950 zone which is the previous resistance and now support. We need to see if that is taken as a support and move up. Even if it does 10980 is another resistance and we need to see where the Nifty closes. If Nifty closes above 11000 then we can have fresh trade opportunities from tomorrow. Else, it’s going to be another long wait for an opportunity to emerge.

Market Trade Setup 8th February 2019 #Nifty

Market Trade Setup 8th February 2019

Yesterday’s 25 basis point rate cut by RBI had triggered a short term rally that took Nifty to 11,120 mark but it couldn’t sustain. You wouldn’t have had any chance to take a position as Nifty was always close to 11,100 mark from the time it opened. So, no positions would’ve been taken yesterday. The USA markets were negative with Dow closing 220 points lower and NASDAQ nearly 100 points down. Today Asian markets are trading mixed with Japan and Hong Kong down 350 points each, while China and Singapore are trading in mild green. Brent crude has fallen below $62 and is trading at $61.4 now which is a positive sign for India.

Coming to domestics yesterday’s monetary policy has evoked mixed reactions where there was a 25 basis point rate cut bringing down the repo rate to 6.25% and MSF and Bank Rate to 6.5%. The inflation forecast was also lowered to under 3% for first half of 2019 and the tone of the policy was also changed to neutral from calibrated tightening. Though markets liked it initially, it couldn’t sustain as there were some growth concerns with services inflation still at 5.8%. So this 6.5% Bank Rate would effectively yield 70 basis points margin for banks which is much lower compared to 125 to 150 points margin kept during the Rajan’s time.

Coming to derivatives there was a mild buying seen in futures market where the overall long positions still stand at 52%. On the options side the Nifty put-call ratio has come down to 1.78 from 1.83 seen at the beginning of the day. On the put side 11,000 put added maximum open interest of 5.3 lakh positions followed by 11,200 put which added 4.2 lakh positions. From 10,700 the floor for the market has shifted to 11,000. 10,700 now has the second highest open interest. On the call side 11,400 call added 4.2 lakh positions and 11,500 call added 3.7 lakh positions. 11,000 call still has the open interest but there is a lot of open interest building at 11,400 and 11,200 which might emerge as the roof going forward.

What is the Nifty call for the Day?

Yesterday there was no chance to take any positions and today Nifty might open slightly gap down between 11,030 to 11,060. On the downside 10,980 is a big support and it might face resistance at 11,080 to 11,100. Today is the last day of the week and some profit booking is expected at any time. So, I would advise to stay out from Trading and look at the Nifty from a fresh point of view as we get into the second half of the series on Monday.