F&O Actions Hint a Fall Substantially Below 10,000 Level Looks Unlikely

Gold Silver Reports – F&O Actions Hint a Fall Substantially Below 10,000 Level Looks Unlikely – The Nifty could continue to consolidate with a positive bias before having a shy at its record high of 10179, F&O cues at Monday’s close indicated.

But, these calculations could go awry if tension in the Korean Peninsula exacerbate, analysts said. The ruling party there celebrates its founding day Tuesday and Western nations are not entirely ruling out a fresh missile or a nuclear test that could elicit military action by the US. Also, any slip up in domestic fiscal math could spook the market. Supports for the current F&O series (expiring on October 26) have shifted higher from 9700 (put) at the start of the series to 9800 now. That means traders who sell puts are confident markets won’t fall substantially below 9800 in the current series. 

On Monday, the major positive was addition of open interest (OI) at the 10000 at-the-money put. That option saw 9.63 lakh shares being added, taking outstanding positions (OI) to 38.7 lakh shares. This action underpins traders’ confidence that, very immediately , a fall substan tially below 10,000 seems unlikely .

“The addition of positions at 10000 put, subject to geopolitical and domestic fiscal status quo being maintained, shows that we will consolidate towards the upper end of 9,800-10,000 before targeting a fresh record for the Nifty ,“ said Ashish Chaturmohta, derivatives and technical head, Sanctum Wealth Management.

However, for the markets to break out conclusively from the 200-point range, sellers of the 10000 Nifty call will have to cover their shorts, analysts added. The 10000 call has the highest OI at 43.65 lakh shares, fol lowed by the 10100 call.  

The average price of the 10000 call, since the beginning of October, is `65. The delta of the option is 0.5, meaning for every 10 point rise in the Nifty, the option would rise by 5 points. This means pressure to cover shorts would increase if the market shows signs of breaching 10,030 conclusively on positive local or global cues.

“Once the 10000 call sellers cover, that will push the market towards 10100 first and could cause the call base to shift to 10100,“ said Chandan Taparia, derivatives analyst at Motilal Oswal Securities. – Neal Bhai Reports

F&O Actions Hint a Fall Substantially Below 10,000 Level Looks Unlikely | Neal Bhai Reports | Gold Silver Reports