Derivative Insigths - April 8, 2020 - Geojit

Nifty April futures closed at 8875.85 with a whooping gain of 9.79% on Tuesday. Indian markets were closed on Monday on account of Mahavir Jayanti. Open interest of the current month expiry declined by 38,475 shares indicating addition of short positions in the markets. Market's fear factor, VIX slipped more than 6% to end the day at 51.80 against 55.3025. FIIs were buyers in the F&O segment for a sixth consecutive day; bought derivatives worth Rs 2079.07cr on 07 Apr as per provisional figures. Also, they were seen increasing exposure in the index futures long by 50.51% and reducing index short by 19.72%.

Yesterday's steep rise has sent traders rushing to cover shorts, especially from the strikes 9000,9200 and even the deep OTM strikes of 10000 and 11000, which has so far been bastions of short. Similar activity was also visible in the ITM strikes of 8500, 8000 as well as 7500. This turn of events can be viewed from two angles. One, that signals that traders have firmly shifted entirely from the extremely directional downside that has been overhanging Nifty for more than a month. Two, that signals that some of the muscle extended to push Nifty to further heights may have eased, as deep OTM shorts are being covered. Well, it is also possible to accommodate both the views, if you take in FII cues. FIIs boosted index future longs by over 19000 contracts, by while cutting index future shorts by similar amounts. While the long addition represented a 50% jump, the short shedding represented just a 20% jump suggesting that there is enough fuel for further short covering rally.

Source : Equity Bulls

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