F&O Tracker: Expect high volatility this week

Akhil Nallamuthu |BL Research Bureau | Updated on: Jan 29, 2022

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The Nifty 50 (17,102) and the Nifty Bank (37,689) showed divergence in performance as the former lost about 2.9 per cent whereas the latter posted a marginal gain of 0.3 per cent last week.

There was a marginal drop in cumulative open interest (OI) of Nifty Bank futures to 21.1 lakh contracts on Friday compared to 21.4 lakh contracts by the end of the preceding week. There was not much weekly change in price as well, denoting absence of indications of a definite trend as it stands.

On the other hand, cumulative OI of Nifty 50 futures saw an increase to 114.4 lakh contracts on Friday versus 113.8 lakh contracts by the end of previous week. Considering that the index dropped, it can be seen as short build-ups.

However, the futures of both Nifty 50 and Nifty Bank saw huge build-up in OIs mid-week showing significant fresh short positions. Nevertheless, the OIs dropped towards the end of the week, potentially indicating that considerable number of shorts might have been covered.

In Nifty 50 call options (February 3rd expiry), 19000-strike call option (19000-CE) has the highest outstanding OI with 79,785 contracts. Among the puts, 16500-strike put option (16500-PE) has the highest OI with 74,308 contracts. Similarly, in Nifty Bank options, 42500-CE (50,340) and 36000-PE (33,743) has highest OIs in calls and puts respectively.

Gap between most active calls and puts in both Nifty 50 and Nifty Bank futures are more than usual, and this could be because participants are expecting higher volatility ahead of the Union Budget and have positioned accordingly.

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Published on January 29, 2022
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