Tag Archives: Options Trading

Market Setup

Market Trade Setup 21st February

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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.

Economy & Finance

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

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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 Setup

Market Trade Setup 15th February 2019 #Nifty

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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 Setup

Market Trade Setup 13th February #Nifty

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Market Setup 13th February

As we approach the middle of the week we are looking at a 125, 56 and 57 point cut in the last three trading sessions and that is a total 238 point cut. If we look at the Nifty on 1st Feb, which was also a Friday, we started from exactly the same level of 10831 and went up 238 points before correcting. So, from 1st Feb to 7th Feb we went up 238 points and from 8th to 12th Feb we fell 238 points. That puts us at a very interesting position of what is going to happen today. Global markets are positive with the US gaining nearly 400 points yesterday on the news that US Govt shut down is finally coming to an end. The feeling has rubbed off to Asian markets also today as they all are in a positive zone with Japan up 350 points and Hong Kong up 150 points. Brent crude is a worry as it’s at 62.8 dollars almost touching 63 dollars. 

On the domestic front, we had the IIP and CPI data that has come yesterday evening and everything came in the range I gave. I said IIP will be between 2.2 to 2.7% and we got a 2.4% IIP for December. On the Inflation front, I gave a 2.0 to 2.4% range and we got 2.05% inflation for January. In that also I gave 5.4 to 5.7% on services inflation and we got 5.4% for the services sector. This is 19-month low inflation and food inflation is still worse at -2.17% and that is something we need to look at. On the Q3 front, finally, some good has come from Bata which declared a fantastic set of numbers. For the last 2 years, I was bullish on Bata and it continues to deliver. Coal India also surprised with good numbers and looks like some good news coming on Q3 front. 

On the derivatives front, there was a lot of positive action on the Nifty futures front, where there was a lot of buying as the markets were correcting in the last hour of trade. The overall long positions now stand at 54% vs 41% at the beginning of the series. On the options front, however, there is a lot of demand for calls than puts. 9 calls were sold yesterday for every put sold and that took the Nifty put-call ratio to 1.35 from 1.47. For tomorrow’s Nifty expiry 10850 put added 1.1 lakh positions and 10800 put added 1 lakh positions. 10800 put now has the highest open interest now. On the call side, 10900 call added 8.2 lakh positions while 11000 call added 4.6 lakh positions and 10950 call added 4.1 lakh positions. 10900 call has the highest open interest. 

What is the Nifty call for the day?

Yesterday, I advised you to take a long position only if Nifty goes below 10850 and holds 10820. This has happened only in the last hour of the trade so very few people would have taken positions. Nifty will open around 10840-10870 zone and the positivity might take Nifty to 10900-10920 zone. If it goes there, exit your long positions. You will still get a 60-80 point profit. If you have not taken any positions yesterday, today you might not get enough room to take long positions and make profits. So, I advise you to wait and watch if Nifty breaks the 10920 resistance or not and where the close happens. For today there is no trade in Futures.

Market Setup

Market Trade Setup 8th February 2019 #Nifty

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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.

Market Setup

Market Trade Setup 31st January #NIFTY

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Market Trade Setup 31st January

Finally, the expiry day to the longest series which had full 25 trading days is finally here. We have started the series almost at 10800 level and now we are 128 points down for this series. Will this first series of 2019 goes to bulls or bears needs to be seen. Last 2 January series was very positive with over 500 point gain, so in that way, this is going to be a bit of a disappointment. Globally things are looking bright as US jobs data showed some positivity and Fed also said that it would be “patient” in looking at rate hikes. That pushed markets up and Dow gained 400 plus points. The Asian markets are in green with Chinese manufacturing data coming slightly better than expected. 

On the domestic front, the big relief came for the market yesterday with ICICI bank coming up with a good set of results in Q3 and that augers well for the entire banking sector. Added to that was the Sri Krishna committee report that said Chanda Kochhar was at fault and she broke the code of conduct of the bank. Immediately the ICICI board distanced itself from her and sacked her and took away all her post-retirement perks and bonuses. But with no adverse financial implications on the bank because of the fraud, it’s a huge sigh of relief for the bank. Today Apollo Tyres, Airtel, Dabur, Dena Bank, Emami, Hero, India bulls housing finance, Petronet LNG, Power grid, Vedanta and V guard are coming up with their Q3 results.

On the derivatives front, today is the expiry day and if we look at the moves yesterday there was a massive selling on Nifty futures as the market was going up and from 13 point premium, Nifty Jan futures moved into the discount. Yesterday there was a lot of action on Index options and we saw 8.98 lakh crore turn over there itself and the total F&O turnover was 11.19 lakh crore. So, as I said the turnover has crossed 10 lakh crore. Today we might see it crossing 16 lakh crore. The contours are now placed at 10600 put and 10580 is a strong support and on the upside 10800 call has the maximum open interest and so today’s broad expiry contours will be 10580-10800 which is a 200 point range and Nifty put-call ratio is at 1.20 and that means there can be some movement over 10700 for Nifty today to make the PCR adjust upwards.

What is the Nifty call for the day?

Yesterday, I asked you to take long positions if Nifty goes to 10620 mark and if you had taken then you would be sitting on a mild 20 point profit. Today there will be a gap up open for Nifty between 10700-10720 mark and when that is reached you will have an 80-100 point profit. This is your final bonanza for the series and exit around 10700-10720 mark and book profits. 10720-10750 will be the resistance zone so don’t take any risk. On the downside, 10650 will be the support and I would expect the expiry to happen anywhere between 10680-10750 mark with a mild 3 PM move. We have already seen the 3 PM move yesterday also so don’t expect anything great. Be safe and tomorrow onwards we have a lot of cues to deal with including budget so keep your money safely in your pocket.

Market Setup

Market Trade Setup 29th January #NIFTY

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Market Setup 29th January

The first day of the expiry week went to the bears where Nifty saw a fall of close to 120 points and now we are back to 10650 levels and the crucial support level of 10700-10720 was decisively broken. Now the downside is open to 10500 now and that looks bit scary. Not only India even US markets fell yesterday where Dow lost more than 200 points and it was on the back of bad numbers from Caterpillar, which is one of the bell weather stocks in the US. The data that is coming is negative across the globe and that is worrying everyone. Today Asian markets are all in red with Hong Kong down 250 points and Japan by 200 points. The only positive is the Brent Crude which fell to 60.1 dollars from the 62 dollars we saw a few days ago. 

Coming to domestics, there are plenty of worries that Govt has to deal with. Rahul Gandhi has announced minimum job guarantee for poor if voted to power and BJP now is on course of making bigger announcements. This will surely put pressure on the fiscal situation in India. The Q3 results continue to be disappointing with Bank of India coming up with a very bad set of numbers. The last 4 quarters have seen a loss of close to 10,000 Cr and that’s a lot of money. Other companies that came up with their numbers is also not very encouraging. Today is a very important day for Q3 and many financial sector companies are coming up with their Q3: Axis Bank, Bajaj Fin services, Bank of Baroda, Godrej Consumer products, HCL Tech, HDFC, Oriental Bank and Tata coffee. 

On the derivatives front, yesterday was a fall day and in Nifty futures market there was some buying initially hoping that market will be taken support at 10700 mark but when it was broken then rollovers started. The first-day Nifty futures rollovers were at 22%. In the options, the index options saw 1.12 Crore contracts with a turnover of 7.09 lakh crore and the total turnover was at 8.98 lakh crore. 10500 put is back as the put with the highest open interest and that added 1.3 lakh positions and 10400 put also getting a lot of open interest with 3.6 lakh contracts added. 10600 put also added 3.6 lakh contracts. On the call side, 10700 call added 16 lakh contracts and 10800 call added 10 lakh contracts. As a result, Nifty put-call ratio plunged to 1.23 from 1.37 seen at the beginning of the day. Now Nifty can gravitate between 10500 to 11000 levels.

What is the Nifty call for the day?

If you are a bull, yesterday was a perfect time to take a break and we have taken a break as I avoided you from taking any positions. Today is a no different day with the opening expected between 10620-10650 levels and we have downside open till 10480 levels and on the upside 10720-10740 is a big resistance. So, today also I would wait and watch to see where Nifty will settle down. I would closely watch 10600 to see if it holds or not. If it holds and Nifty closes between 10600-10650 then we can look at some trade happening tomorrow. But for today, it’s going to be a wait and watch.

Market Setup

Market Trade Setup 28th January #Nifty

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Market Setup 28th January

The 5th week and the expiry week has begun and we are where we were at the beginning of the series. We have not moved anywhere during these 4 weeks and these last 4 days might not be much of a difference. US markets are on positive territory with Dow gaining for the 5th straight week and on Friday it closed up 180 plus points in green. The promise of an end to the shut down seems to have added a positive trigger to the US markets. Today Asian markets are in green, except Japan and most of them are trading with a 0.5% gain with Hong Kong up by 170 points and Japan is the only market which is down 60 points. Brent Crude has settled itself and its trading at 61.5 dollars. 

On the domestic front, there are problems with ICICI. CBI has raided Chanda Kochhar and her husband along with the Videocon offices and that will have a negative impact on ICICI. The main problem is even the present management of ICICI is named in the scandal of giving undue loans to Videocon for them helping Chanda Kochhar. Apart from that Zee also has some problems as Subash chandra is trying to find a majority stake holder to offload his stake in Zee. Q3 results continue to pour in and so far its mixed bag. Following are the Q3 results expected today: Bank of India, Canara bank, Chennai petro, Godrej properties, Escorts, Radio city, RBL bank, Tata power, TTK, Wockhardt pharma. 

On the derivatives front, the action has now firmly shifted to options from Futures. The Nifty put call ratio fell further to 1.37 from the 1.43 mark where it began on Friday. The turnover in the Index options market was 5.53 lakh crore and that takes the overall F&O turnover to 7.24 lakh crore. On Friday, every strike on put side has unwinding of open interest and we saw 4.1 lakh shares unwinding, followed by 10800 put which unwound 3.3 lakh contracts. Still 10800 put has the highest open interest followed by 10700 put. On the call side 10800 call added 8.2 lakh positions while 10900 call added 7.2 lakh positions. 11000 has the highest open interest followed by 10900 call. 

What is the Nifty call for the day?

Today, I caution you from trading and I know Monday morning not trading is not a great thing to do. Nifty is at 10780 and its likely to open in that band only between 10780-10800 zone and 10820-10840 is the 20 and 200dma and crossing that is going to be very tough. The downside is also not opening up with 10720-10740 offering a great support for Nifty. In such a scenario I would ask you to wait and watch and if during the course of the day any possibility of an options strategy opens up, I would tweet the same. We need to see if 10820-10840 will be taken out or not easily. Till then no point in going long or short.

Market Setup

Market Trade Setup 24th January #Nifty

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Market Setup 24th January

What a boring January series it’s turning out to be. A 35-day series which has 25 working days, even after 20 working days, Nifty has still not moved anywhere. We are still at 10800 the place where we started this series. We didn’t move much on upside or downside also. We went to 10700 on the downside and 10900 on the upside. So, all that we had was 200 point movement in 20 days where practically no profitable trade is possible. US markets were again up by over 150 points yesterday on domestic cues. Asian markets opened up mixed, mainly on their own country’s factors and there is no big global factor that is affecting them.

On the domestic front, there is some worry on ITC front yesterday and the results were really not upto the mark. The last 1 hour fall in Nifty was mainly led by the fall in ITC. On the other hand Bharti infratel came up with good set of numbers and that will mean some light seen at the end of the tunnel for telecom sector. In other news Brent Crude which went to almost 63 dollars has now come back again to 60.8 dollars and that will be the relief for Govt. Following are the Q3 results expected today: Biocon, Colgate, Edelweiss, ICRA, Jindal SAW, Pfizer, PNB housing, PVR Cinemas, Sintex, VST industries, Yes bank. 

On the derivatives front, one point that needs to pay attention to is Premium of Nifty futures going up as Nifty was going down. At the beginning of the day premium was 13 rupees which surged to 23 rupees by the end of the day. This shows a lot of buying happening as Nifty was falling. So, its indicative of some movement in the upward direction. On the options front, the Put-call ratio is at 1.43 now down from 1.53 seen at the beginning. Surprisingly, 10800 put now has the highest open interest followed by 10500 and then 10700. Does that mean that we have reached the floor and on the up move now? 11000 call has huge open interest and 10900 is second. 

What is the Nifty call for the day?

It was good that we didn’t take a trade yesterday and stayed out. Today we will open in 10830-10860 range and there is a lot of support coming in at 10780-10800 levels, so markets might go up taking support there. So, I suggest you to take a long position at and a level below 10850 with 40-50 as the target. 10890-10920 is the cut-off point. It can be taken to the next day also if the target is not met.