F&O Manual: Setup weak as traders prefer selling on rise; metals show bearishness

The set up was weak for another day on Dalal Street on February 10. The Nifty slipped lower by 56 points as of 10 am to 17,838 dragged largely by IT and metal stocks. Traders maintained that the market was conducive for bullish trades.

On the options front, 17,800 was the battle zone as the strike saw an accumulation of both put and call, signalling that traders have likely used the straddle strategy at this level, which is a neutral strategy. Meanwhile, 17,900 has also seen call writing, as it is emerging as another hurdle for the index.

“My strategy for today is to sell on rise,” said Saatosh Pasi, a derivative trader and an investment advisor. He added that the outlook was negative for the market.

Bank Nifty traded flat. For the index, 41,500 seems to be a battle zone as traders are keen on taking neutral trades early morning.

Sectorally, while banking, media and telecom saw a long buildup – a bullish setup when price and open interest rise altogether, metals, cement, capital goods and pharma saw a short buildup – a bearish sign when price falls but open interest rises.

Bars reflect change in OI during the day. Red bars show call option OI and green put option OI.

A heatmap showed that Lupin, United Breweries, Astral and HCL Tech saw a short buildup. On the other hand, Aurobindo Pharma, Indus Towers, Page Industries and PNB saw a long buildup.