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C. Raja Rajeshwari

WITH the futures contracts trading in premium and the build-up in open interest across contracts, barring M&M, i-flex, Grasim, L&T and BSES, the indication is that the underlying sentiment in the F&O segment is positive.

Nifty: The cost-of-carry jumped for all the three-month future contracts. The contracts reversed to trade in premium to spot. However, this positive trend has to be viewed with caution due to the lesser-than-normal increase in the open interest of near-month September futures contract. The increase was just 23 per cent. Normally the trends in the past have been that there is a considerable amount of build up in open interest in the second week of trading in the near-month contracts.

Volatility check: The implied volatility of the put on the Nifty has stabilised, after falling to a low of 10 per cent mid-week and rising to a 28 per cent during the later part of the week, with the fall in the index. The increase in the later part is mirrored by the put options increasing in value.

The IV for the September 1380 put (in-the-money) is 26 per cent. The put has jumped in value from Rs 23.60 to Rs 29.10 on a week-on-week basis.

Volatility-wise, the calls are trading rich with the writers taking into account the risks involved in a more pronounced manner. The put-call ratio stood at 0.58. The ratio has reduced from 0.79 of previous week. Though this decline in the put-call ratio does points to a degree of positive sentiment, the put open interest build up vis-à-vis call open interest, does show the underlying indecisiveness.

HLL: There has been a 43 per cent jump in the open interest across September futures and options. The fact that the underlying stock was seesawing did not seem to deter from new positions being taken. There has been a 47 per cent increase in the open interest of the September futures.

The underlying stock price movement does not seem to have much effect in the IV, which is hovering around the 42 per cent (both calls and puts). This is one of the reasons why there is a sudden interest in the option contracts of HLL. Higher open interest in calls suggests positive sentiments towards the stock.

Among the September calls, the trading interest is concentrated in the 190-strike and 200-strike (both out-of-the-money). These new positions in out-of-the-money calls suggest positive sentiments in the stock.

Punjab National Bank: Futures contracts on this stock were higher than options. The open interest closed higher than previous week' close. However, on Friday with the underlying stock's decline, positions initiated at 160 levels causing a decrease in the open interest.

Among the available options contracts, the September 180 call (out-of-the-money) is the most actively traded. The options are trading rich with the IV in both calls and puts ending the week at 63 per cent. With no historic IV to gauge by, the option writers are pricing higher level of risk into the contracts. The put-call open interest ratio stood at 0.05. However, this does not present a clear picture as the options contracts are sparsely traded.

HPCL: the futures are trading at an Rs 4 premium to the spot. However, the September futures had a decline in open interest. Owing to the increase in the stock, positions initiated in the 410-420 levels has been closed out.

The IV for the calls has jumped to 60 per cent, whereas it remained stable for the put at 44 per cent. Calls were the most active, with more new positions being created in the out-of the money calls (September 430-stike and 440-strike)

BHEL: The trading interest has perked up in the spot and derivatives market. The futures are trading at an Rs 1.4 premium to spot. However, in the last three trading days, the open interest has declined suggesting that players are closing out positions.

# Overall open interest for the September futures and options is two-fold of the market wide limit. With 13 more trading days for the contract to expire, the margins are likely to increase, if new positions are created on BHEL contracts.

# The IV for the both calls and puts has declined to settle in 47 per cent levels. This fall in IV, suggest that the options are trading cheap, indicating a buying opportunity.

If you have any queries relating to the futures/options, please mail them to Futures & Options, Kasturi & sons, 859-860, Anna Salai, Chennai 600 002 or email to

fno@thehindu.co.in

with a mention of futures/options in the subject line of the mail.

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