F&O Manual: Write calls at higher strike prices for Nifty, analysts say
The Nifty witnessed selling for the fourth consecutive session today amid weak cues from global markets which saw the index even slipped below 17,000 intraday.
Bears tightened their grip on the Nifty as the index ended lower for a fourth consecutive session on March 14. The sharp losses in four sessions saw the headline index slip below its key resistance of 17,000 intraday. However, some buying at lower levels helped the index recoup some of its losses and end the session above that level, albeit marginally. All sectoral indices ended in the red as weak Asian cues dragged sentiment for the domestic market. The Nifty settled the day 111.00 points or 0.65 percent lower at 17,043.30. (Blue bars show volume and golden bars open interest (OI)).
2/5
On the options front, 17,200 saw the largest accumulation of call writers followed by 17,100 and 17,1500 on the back of a fall in Nifty below those levels. "Writing at higher strike price call options suggests that the index is likely to face pressure while making any attempts for a pullback," said Ratnesh Goyal, Senior Technical and Derivatives Analyst at Arihant Capital Markets. Following four sessions of sharp losses, Goyal expects to see some consolidation making its way for the Nifty as indicators suggest the index has slipped into an oversold zone. On that account, he suggests investors to write call options of higher strike prices, 17,400, 17,500 and 17,600. On the downside, immediate support is seen at 17,000 followed by 16,800 which witnessed the strongest put buying. (Bars reflect change in OI during the day. Red bars show call option OI and green put option OI.)
3/5
Just like Nifty, the Bank Nifty also witnessed another bout of selling today which saw it break below 39,500. Following the decline below that mark, strong call writing was seen at the 39,500 strike price. Even though momentum for the sectoral index remains weak, Ruchit Jain, lead research at 5paisa Capital, expects to see a pullback move coming in for Bank Nifty. However, for that to happen, Bank Nifty must defend the 39,000 level, he added. "If Bank Nifty manages to hold above 39,000, we can some pullback towards 40,000," Jain said. Foreseeing a breather coming in for the sectoral index, Jain also suggests investors to initiate a call spread by buying calls of 39,800 and selling 40,200 for the next weekly expiry. (Bars reflect change in OI during the day. Red bars show call option OI and green put option OI.)
4/5
Adani Enterprises witnessed a strong short buildup as open interest surged 13.9 percent as investors chose to book some profits after its recovery in the past weeks. The short build-up is a bearish sign that takes place when the price of a stock falls, along with high open interest and volume. Other Adani Group stocks, Ambuja Cements, Adani Ports and Special Economic Zone, along with Bandhan Bank and Intellect Design were others that witnessed a heavy buildup of short positions. (Bars reflect change in OI during the day. Red bars show call option OI and green put option OI.)
Mahindra & Mahindra Financial Services was among the few that witnessed long addition. Open interest in the counter rose 1.7 percent while the stock gained around 2 percent in the cash market. A long build-up is a bullish sign that happens when open interest and volume increase with the rise in share price. GMR Infra, Cummins India, Zee Entertainment Enterprise, and Trent were among others that saw some addition of long positions. (Bars reflect change in OI during the day. Red bars show call option OI and green put option OI.) Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
![On the options front, 17,200 saw the largest accumulation of call writers followed by 17,100 and 17,1500 on the back of a fall in Nifty below those levels. Writing at higher strike price call options suggests that the index is likely to face pressure while making any attempts for a pullback," said Ratnesh Goyal, Senior Technical and Derivatives Analyst at Arihant Capital Markets. Following four sessions of sharp losses, Goyal expects to see some consolidation making its way for the Nifty as indicators suggest the index has slipped into an oversold zone. On that account, he suggests investors to write call options of higher strike prices, 17,400, 17,500 and 17,600. On the downside, immediate support is seen at 17,000 followed by 16,800 which witnessed the strongest put buying. (Bars reflect change in OI during the day. Red bars show call option OI and green put option OI.)](https://images.moneycontrol.com/static-mcnews/2023/03/1.2.png "On the options front, 17,200 saw the largest accumulation of call writers followed by 17,100 and 17,1500 on the back of a fall in Nifty below those levels. Writing at higher strike price call options suggests that the index is likely to face pressure while making any attempts for a pullback," said Ratnesh Goyal, Senior Technical and Derivatives Analyst at Arihant Capital Markets. Following four sessions of sharp losses, Goyal expects to see some consolidation making its way for the Nifty as indicators suggest the index has slipped into an oversold zone. On that account, he suggests investors to write call options of higher strike prices, 17,400, 17,500 and 17,600. On the downside, immediate support is seen at 17,000 followed by 16,800 which witnessed the strongest put buying. (Bars reflect change in OI during the day. Red bars show call option OI and green put option OI.)")
![Just like Nifty, the Bank Nifty also witnessed another bout of selling today which saw it break below 39,500. Following the decline below that mark, strong call writing was seen at the 39,500 strike price. Even though momentum for the sectoral index remains weak, Ruchit Jain, lead research at 5paisa Capital expects to see a pullback move coming in for Bank Nifty. However, for that to happen, Bank Nifty must defend the 39,000 level, he added. "If Bank Nifty manages to hold above 39,000, we can some pullback towards 40,000," Jain said. Foreseeing a breather coming in for the sectoral index, Jain also suggests investors to initiate a call spread by buying calls of 39800 and selling 40,200 for the next weekly expiry. (Bars reflect change in OI during the day. Red bars show call option OI and green put option OI.)](https://images.moneycontrol.com/static-mcnews/2023/03/3-1.png "Just like Nifty, the Bank Nifty also witnessed another bout of selling today which saw it break below 39,500. Following the decline below that mark, strong call writing was seen at the 39,500 strike price. Even though momentum for the sectoral index remains weak, Ruchit Jain, lead research at 5paisa Capital expects to see a pullback move coming in for Bank Nifty. However, for that to happen, Bank Nifty must defend the 39,000 level, he added. "If Bank Nifty manages to hold above 39,000, we can some pullback towards 40,000," Jain said. Foreseeing a breather coming in for the sectoral index, Jain also suggests investors to initiate a call spread by buying calls of 39800 and selling 40,200 for the next weekly expiry. (Bars reflect change in OI during the day. Red bars show call option OI and green put option OI.)")
