In this analysis we will talk about monthly outlook of Nifty 50 and we will also discuss about various factors such as Low VIX, and dissect the derivatives data for a clear understanding.
We will also discuss about the low volume in our market and the pattern that is followed by the market, i.e. market opens Gap Up then it becomes choppy throughout the day, we rarely see momentum based buying in our market in real time, in-front of the screen.
Nifty 50 Derivative Data Analysis:
If we analyse the monthly data, On the CALL side 24,400 strike price long positions are added, you see the IV along with Volume and OI spurts then these are not confident inspiring long positions which are also called perpetual long positions.
On the strike price of 24,500--24,600 and 24,700 short positions via CALL writing are being carried forward. To protect these positions the strike prices of 24,900 and 25,000 are being brought as a hedge. The amount of hedging positions created is twice than the short positions built on the strike prices of 24,500--24,600 and 24,700 this is done due to low premium cost of hedging positions.
If you see the DEEP ITM CALL side strike prices of 23,500--23,600 and 23,800 the long positions are being closed slowly.
On the strike prices of 23,900 and 24,000 the long positions are still intact.
Along with this if we analyse the PUT side data the long positions on 24,000 and 24,100 are being closed slowly. On 24,200 there is slight PUT writing positions still exists and these positions are used to protect the short positions on the CALL side strike price of 24,500--24,600 and 24,700.
If you see DEEP ITM PUT contracts 24,500--24,600--24,700 and 24,800 then PUT accumulation is visible and these positions are being carried but the quantity is small.
DEEP OTM PUT contracts of 23,000 and 23,500 which were existing since the beginning of the month, these positions are being closed for profit booking purposes, the IV and OI spurts are indicating about this.
As you know that many times positions are created in options to gain theta as well the positions are hedged to increase the overall ROI since by hedging the margin requirement is decreased.
Conclusion:
If we draw a conclusion according to options data, we are getting a broader range of 23,000 to 24,600. So the upside is quite limited from here, we are witnessing short positions are still intact on 24,500--24,600 and 24,700 CALL side strike prices. We are talking about monthly data so there is a possibility of 300-400 point upside and 24,500 is still a strong resistance zone as well as we have seen multiple reversals from 24,500 levels. 24,500-24,600 are still a big hurdle and even if market moves slowly the CALL selling positions will gain profits. When we are analyzing data, as of now it would be very much difficult for Nifty to cross 24,700 on monthly basis.
DEEP ITM PUT contracts 24,500--24,600--24,700 and 24,800 then PUT accumulation is visible similarly on the PUT side data the long positions on 24,000 and 24,100 are being closed slowly which are very small quantity. But the main thing is positions were closed on 23,000 and 23,500 strike price since the last two days which were quite significant in quantity.
For market 24,000-24,200 is significant for Nifty and if there is decisive breakdown of this level and Nifty starts hovering below 24,100 level then it would open a downside risk for Nifty and Nifty could decline towards 23,300-23,500 levels.
Nifty closed today 24,200 levels the upside is very much limited to 24,500-24,600 levels but for this Nifty needs to sustain and give a decisive breakout of 24,250 level.
If we see from here, there is 300-400 point upside but the downside is about 700-800 points.
If there is any change in data or levels I will try to update it on Dicey Trade.
Futures Data:
If you notice the Futures data then there is turnover increase from last 2-3 days and its 7,22,23,377 and the number of contracts have also increased and its near 1 crore. The type of turnover increase and the increase in number of traded contracts the number of the long positions but we don't see that type of bullish momentum this means contracts are being closed in the market at the upper levels (long unwinding)-this is a very negative sign.
India VIX:
Technically if you see India VIX it has been shrinking since the last few session, and the more it shrinks it will kill market volatility so on intraday basis and the options will become cheaper so it would be very much difficult to make profits in intraday option buying and the options will decay very slowly which makes it difficult for option sellers. It would be a different thing if you hold the options on positional basis but its very much risky to do so in the current environment due to low VIX.
Liquidity Crunch:
If we see the volume in Nifty then there is a hit in volume due to RBI restrictions on Prop Desk Funding and a liquidity crunch is generated in intraday basis which we have discussed in detail HERE. There is a drop of 20-35% in the Index Futures volume, due to which we don't see follow up buying after the market opens Gap Up, while the selling pressure is generated with momentum because mostly the long positions are being created by the retail traders so we see a panic sell off.
Disclaimer:
Whenever we post derivative analysis, its a unbiased analysis and we don't include any type of news, this analysis is purely based on the options contract data and Futures contract data from the NSE's website. This analysis has been done after the market close, and it is entirely my personal view. This analysis can be 100% wrong and does not promote any type of buying/selling activity.
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