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Oct 23, 2012, 12.12 PM IST
Siddharth Bhamre of Angel Broking is not very optimistic about the way the October series will expire. He expects the market to correct and test support level of 5,630-5,640.
Siddharth Bhamre of Angel Broking is not very optimistic about the way the October series will expire. He expects the market to correct and test support level of 5,630-5,640 . "Further, if these long positions are not rolled over or if not squared off then market would take support around 5,600 levels and bounce back," he added.
However, he sees the market rising higher in the November series and remains bullish on it. He recommends buying 5,700 Call and Put of November series. "November series is very big; you have 35 days including holidays, so it is a big expiry. Therefore, one has time and low implied volatility that calls for buying Options," he elaborated.
Below is the edited transcript of Bhamre's interview with CNBC-TV18.
Q: Where do you see expiry this time around and how quiet and range bound this series has been?
A: The way build up has happened in mini Nifty especially, long positions formed by weaker hands around 5,750 levels, this market would go side ways, and we have seen a sideways market for a week. Since last couple of days we are seeing a dumb trade happening of writing Call and Put in anticipation that market would stay here only by weaker hands.
We were anticipating that people have been long from 5,750 odd levels, selling 5,800 Calls, selling 5,600 Put as well, this short strangle which people have formed based on the expiry. Our call is that we might see a downside in the next couple of trading sessions.
We were surprised and slightly disappointed to see market going up yesterday. It is possible that we might correct and touch that support level of 5,630-5,640 and we may even breach those levels. If these long positions are not rolled over or if not squared off then market would take support around 5,600 levels and bounce back.
We are not very optimistic from current expiry point of view. We remain bullish for November series. The strategy we are suggesting to our clients especially from November series perspective is that implied volatility (IVs) is less 14% IV both for Call and Put. Call IV is slightly higher than Put IV, which is not a usual phenomenon.
At the same time, unlike October series, November series is very big, you have 35 days including holidays, so it is a big expiry. Therefore, one has time and low implied volatility that calls for buying Options. Whether the market goes up in the beginning of the November series, which we feel will happen or it goes down in next two days of remaining October series, buy 5700 Call and Put of November series and see volatility as well as delta rise of these Options.
Q: If you had to choose one side though of this strangle or straddle that you are buying, which one would you be more inclined towards; buying the Call waiting for upside in November?
A: Yes that would be the case, for November series we would be long. One factor which would be very important to take that call is rollover in mini Nifty. If mini Nifty rollovers are less, right now they are 16 percent, which is on the lower side and just two trading sessions are left, if that is less then we are going to double the quantity of Call option.
Only for the October series, I would like to go short on Nifty. We are slightly scared of doing that trade because people have blindly shorted 5,800 Call option in big way. If one looks at the Put Call chart, one can see a big tower of 5,800 - that is where most of the people have gone short.
I am scared of shorting for the next two trading session, so I am using this bias strategy towards taking IVs and time value into consideration, a safer strategy rather than a bold call. If we get less rollovers in mini Nifty today and market bounces back slightly, then for expiry day I will be quite certain of going short on this market, but that would be only for one day. For November we will be bullish and we will be buying only Call option.
Q: Do you have a strategy on DLF , which has been seeing positions getting build up for a long time now, anything you would do there?
A: We have initiated a buy today in our daily report. Too many short positions, though the stock has very strong support around Rs 190-195 even Rs 200-205 is a very good support zone. If market has to be in a range or probably move up from current levels then DLF might see short covering.
That is a punt one can take from remaining 2-3 trading sessions of this expiry and go long. We are more bullish than bearish on DLF at this point of time from Rs 205 odd levels.
Action in DLF
May 25 2013, 16:36
- in Technicals
May 25 2013, 16:36
- in MARKET OUTLOOK