Traders pick call options as Bank Nifty takes a plunge

Madhavan M.J | Updated on October 05, 2018

Attractive price level may be the reason for fresh long calls

Bank Nifty index continued to weaken due to rising oil prices, falling rupee, rising bond yields amid heavy FII outflows. Bank Nifty October futures contract nosedived 426.50 points to close at 24,737.15 on Thursday. The underlying value of the contract closed at 24,819.30.

Active call options of Oct 11 expiry

Among the call option chain, the in-the-money Bank Nifty Call 24,800 option was the actively traded contract on Thursday. The option price declined 45.15 per cent to Rs 291. However, open interest in the contract climbed 7,344 per cent with fresh addition of 1,26,320 shares.

The implied volatility of the option price was reasonably higher at 18.70 per cent. It signifies that the Bank Nifty is likely to encounter strong resistance around 25,100-25,200 levels in the short-term in case of reversal in its direction.

The Bank Nifty Call 25,000 option contract is currently an out-of-the-money option. The option price had ended lower by 49.40 per cent at Rs 200 on Thursday. There was a fresh addition of 2.82 lakh shares in this contract, with the OI surging 541 per cent over its previous numbers.

The IV was comparatively higher at 19 per cent that indicates there was good demand for the contract. Hence the Bank Nifty may encounter resistance around 25,200 levels in the short term.

Active put options of Oct 11 expiry

On the put option chain, the in-the-money Bank Nifty Put 25,000 option contract was the actively traded one on Thursday. The put option price had increased by 66.70 per cent to Rs 523. OI too jumped 48.10 per cent with a fresh addition of 57,160 shares in the contract.

The implied volatility was exceedingly higher at 32.99 per cent. This underscores that the spot Bank Nifty is likely to get support around 24,500 levels on further downside.

The out-of-the-money Bank Nifty Put 24,500 contract having October 11 expiry saw sizeable addition of OI on Thursday’s trading session. This put option price had gained 77.77 per cent and closed at Rs 275, while the OI climbed 130.65 per cent.

The option price turned expensive with the implied volatility of the option price rising steeply by 31.85 per cent. This indicates that the Bank Nifty is likely to get strong traction around 24,250 levels, in case it breaches 24,500 support levels on the downside.

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Published on October 05, 2018
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