F&O Tracker: Bearish index derivatives

Akhil Nallamuthu |BL Research Bureau | Updated on: Mar 05, 2022

A bear rests on top of a downward pointing stock chart. | Photo Credit: DNY59

Nifty 50 (16,245) lost about 2.5 per cent and Nifty Bank (34,408) lost 5.6 per cent last week. Along with this, there has been a significant increase in the cumulative open interest (OI) of futures contract of both indices. That is, in Nifty 50 futures it stood at nearly 167 lakh contracts on Friday versus 123 lakh contracts a week ago. Similarly, in Nifty Bank futures it was at 44 lakh contracts as against nearly 26 lakh contracts. The decline in futures price along with an increase in the OI indicate fresh short build-up.

Notably, the Put-Call Ratio (PCR) of the Nifty 50 nearest weekly expiry has dropped to 0.46 on Friday compared to 0.66 a week back, indicating more call option writing which means participants are expecting limited upside. In Nifty 50, 17000 and 17500-strike call options (March 10 expiry) have the greatest number of OI with 1,33,063 and 98,267 contracts respectively. So, these levels can be resistance for the index. At the other end, the 15000-strike put options has the highest OI with 53,493 contracts, which is quite far from to current level. Therefore, a clear bearish bias can be seen.

The PCR of Nifty Bank has also dropped from 0.79 to 0.54 in the corresponding period hinting at more call option selling. 38000, 37000 and 37500-strike call options, have outstanding OI of over 52,000 contracts each whereas 33000-strike put has the most OI i.e., 43,408 contracts. Therefore, the downside is comparatively minimal in Nifty Bank compared to that of Nifty 50 according to nearest weekly expiry.

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Published on March 05, 2022
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