Volatility index back to normal: Angel Broking

Views of Ms. Sneha Seth (Derivative Analyst, Angel Broking):

"Post yesterday's strong recovery, the benchmark index began today's session on a positive note owing global cues and extended its gains thereafter. Eventually, the index managed to close above the importance hurdle 10400-10450 levels. In index futures segment, we witnessed fresh long formation as OI in Nifty as well as BankNifty surged by 5.77% and 1.71% respectively.

As far as Nifty options activities are concerned, we hardly saw any strikes of call options adding relevant position. However, decent amount of short covering was seen 10400-11000 strikes, indicating call writer have given up the hopes on market closing below 10400-10500 levels in current expiry. On the flip side, 10250-10500 put options added good amount of positions and looking at puts implied volatility, we can sense these are short formations. However, maximum concentration of OI remains intact in 10500 call and 10000 put options.

In the initial part of the December series, we witnessed good amount of short forming in index futures and we believe these positions are still intact; especially in Nifty. Today, the benchmark index has surpassed the strong hurdle of 10400-10450 which may now result in further upside due covering of the shorts formed earlier. At current juncture, traders are advised avoiding any fresh shorts in index and focus on individual counters to fetch higher returns."

Source : Equity Bulls

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