Stocks

Surge in demand for Bank Nifty 28,000-Call

Madhavan M.J._7262 | Updated on August 14, 2018 Published on August 14, 2018

Resistance seen around 28,100 levels; Short-term support around 27,600

The Bank Nifty index slumped on Monday as global sell-off triggered heavy selling in domestic markets amidst the rupee declining to an all-time low on concerns of a spill-over from a crisis-hit Turkey.

The Bank Nifty index declined 329.85 points to 27,794.40. The Bank Nifty August futures contract ended down by 282.55 points at 27,884.

Active call options of August 16 expiry

Among the call option chain, the In-The-Money Bank Nifty Call 27,700 option was the actively traded contract on Monday. The option price closed at Rs 244.30, down 48.45 per cent. However, open interest in the contract jumped 72 per cent.

Traders had bought some long-call positions in the contract as the option price fell in line with the drop in the underlying index. The implied volatility of the option was abnormally higher at 17.90 per cent.

This confirms that the underlying Bank Nifty may face stiff resistance around 27,950-28,000 levels if the index reverses from downside movement.

The Bank Nifty Call 28,000 option contract is currently an Out-Of-The-Money option that turned very active for this expiry on Monday. The call option price was down by 67.25 per cent at Rs 77.45. Interestingly, the OI rose 323.75 per cent.

The IV of the option price was unusually higher at 15 per cent which signifies that this option was in good demand at these price levels. Since there was maximum addition of OI at this strike price, the underlying Bank Nifty index may encounter strong resistance around 28,000-28,050 levels for this expiry in case of a reversal from these levels.

Active put options of August 16 expiry

On the put option chain, the In-The-Money Bank Nifty Put 27800 option contract had turned active on Monday. The put option price gained 143.50 per cent too Rs 111.30. OI increased by 83.80 per cent.

The implied volatility was comparatively lower at 11.90 per cent. This confirms that the underlying Bank Nifty is likely to get support around 27,650-27,700 levels in this expiry.

The Bank Nifty Out-Of-The-Money Put 27,700 contract was another contract of the weekly expiry that traded quite active on Monday. This Out-Of-The-Money put option price gained 153 per cent to Rs 80.50.

OI jumped 77 per cent. The IV of the option price was relatively higher at 13.05 per cent which implies that this option price was in reasonable demand from traders. This confirms that the Bank Nifty underlying may get support around 27,600 levels in this expiry.

Published on August 14, 2018
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