Call writers turn aggressive ahead of Apr F&O expiry

The latest options data on NSE after trading hours on last Friday points to widening trading range when compared to the previous truncated week. The gap between resistance and support levels increased by 1,000 points as 18,000CE and 17,000PE expected to be those levels for the week ahead (April 15-29, 2022). The week also has the April F&O series expiry session as well.

The 18,000 strike has the highest Call OI followed by 17,500/ 17,400/ 17,300/17,800 strikes. Further, 18,000/17,200/17,800/17,700 strikes recorded significant build-up of Call OI. Coming to the Put side, maximum Put OI base is seen at 17,000 strike followed by 16,500/ 17,200 /16,200/16,400/16,700 strikes, while 17,000/ 16,700/ 16,300/ 16,500 strikes witnessed modest addition of Put OI.

Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: "From the derivatives front, option writers were seen active at 17500 Call strike and 17000 Put strike. With overall correction in markets, Call writers were seen as aggressive and they had added hefty Open Interest as compared to Put writers."

Going ahead, analysts predict that the levels near 17200 should be crucial for the index to witness a recovery towards VWAP levels of 17600 in the settlement week. Also, considering significant low Open Interest of just near 85 lakh shares, major declines seem unlikely. While global cues along with results from index heavyweights will remain crucial, recent lows near 16800 should remain important support levels for the Nifty.

Sizeable Call base for the week was at 17200 followed by 17500 strike. A close above 17200 is required for the Nifty to move towards 17500. Considering results next week, domestic cues will also play a vital role.

Sectorally, technology heavyweights have come under selling pressure along with select heavyweights from the banking space. However, further declines in these stocks may not be seen as accumulated short positions may be closed during the settlement week.

"In the week gone by, most of the major indices closed in red territory. Bank Nifty gave steeper correction in the week gone by as compared to Nifty," adds Bisht.

For the week ended April 22, 2022, BSE Sensex closed at 57,197.15 points, a further drop of 1,136.78 points or 1.94 per cent, from the previous week's closing of 58,333.93 points. Registering a continuous fall of 303.7 points or 1.73 per cent, NSE Nifty ended the week at 17,171.95 points from 17,475.65 points a week ago.

Bisht forecasts: "On the technical front, both the indices are trading close to their 200DMA on daily charts. For upcoming sessions, traders need to remain cautious as the market could get deeper cuts, if it manages to slide down its 200DEMA on a daily interval. In the upcoming sessions, we expect Nifty to trade in the range of 17000-17400 levels, while Bank Nifty could sail in the 35700 - 36700 range. On the higher side, Nifty needs to give a decisive move beyond 17400 level for any further upside."

India VIX gained 2.80 per cent to 18.35 level. "Implied Volatility of Calls closed at 16.85 per cent, while that for Put options, it closed at 17.89. The Nifty VIX for the week closed at 17.85 per cent. PCR of OI for the week closed at 0.94 lower than the previous week, which indicates more Call writing than Put writing," added Bisht.

FIIs in the F&O space remained high primarily due to violation of 17000 strike as they turned net buyers in stock futures and sold index futures. Amid significant volatility, FIIs bought index options worth Rs17,725crore and also to the tune of Rs2,100 crore in stock futures, while offloading Rs800 crores in index futures.

Bank Nifty

NSE's banking index closed the week at 36,044.75 points, a marginal decline of 1,418.65 points or 3.78 per cent, from the previous week's closing of 37,463.40 points.

Major Put writing is seen at 36,000 strike, which remains the key support level in the expiry week. With lower OI base and almost the same positions in index futures by FIIs we feel downsides should be limited. However, if in case the index fails to hold 36000, then a sell-off could be sharp in the expiry week.

Analysts expect more stock-specific activity, going forward, due to rollover activity. Until the index holds 36000, there would be more of a consolidation as again on the higher side good amount of Call writing was observed ahead of the main expiry.