Derivative Insights - May 13, 2020 - Geojit

Nifty's active futures for May expiry settled yesterday at 9212.35 at a premium of 15.8 as opposed to a discount yesterday. This turn helped by a late pull back puts an the end of a 7 day downtrend. While may futures shed 29475 in OI, june futures added 73425 positions. VIX rose briefly, by 0.40% to 38.1925. FIIs were seen adding longs to their index futures positions by 3314 contracts, while shedding 8443 contracts of index future shots.

Nifty Outlook

With sharp decline in index future short positions yesterday and a fair build up in index future longs, the proportion of index future longs in FII portfolio is closing in on critical levels, but not yet unsustainable, and historical trends allow for more additions before vulnerability sets in. But this is to be seen as a case of low interest in shorts, rather than any abnormality in long build up, and is a reflection of the trading ranges that we have seen lately, rather than any abnormality. As such the index futures positions are about 30 percent below what was seen in the second week of last month. Meanwhile, activity along broader Nifty spectrum showed that the call traders were seen booking profits after being steadfastly short in the previous days. Calls have begun to see long build up especially along 9300-9100, while put traders who have been largely short so far are beginning to ease such positions, which have been short so far. The 8800 & 9100 strikes are the most active among puts in terms of OI build up, while 9000 and 8500 were the most active in terms of volume. In all, we are not heading into a vacuum of surprise, as indicated by the recent changes in the option spectrum. Hence, brace for a turn lower after the gapped up opening, as opposed to a directional upside. However, low OI levels so far hints at potential for fresh volumes to flow in, which should set the stage later in the day/week for directional moves.

Source : Equity Bulls

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