F&O Experts Predict Increased Nifty Volatility Amid Heavy Put Writing at 23,700 Strike
Short covering helped Nifty recover some of its intraday losses, but overall sentiment remains jittery, according to futures and options traders.
Most sector indices remained in the red, with Media, PSU Banks, and Oil & Gas joining Metals and Realty in dropping more than 4.5 percent.
Nifty’s open interest (OI) put-call ratio has fallen to 0.48, indicating a surge in call option writing. This suggests traders are not expecting a market rise. As option writers face greater potential losses if the market moves against them, their actions are seen as more telling.
The India Volatility Index jumped 50.84 percent to 21.6, its highest in nine years, reflecting increased fear and uncertainty among traders.
Option premiums have also surged, as writers demand higher compensation for the increased risk. Akshay Bhagwat, Vice President of Derivative Research at JM Financial, noted that the spike in premiums is due to the unwinding of puts from recent expirations, especially after today’s unexpected drop.
Arun Mantri, Founder of Mantri Finmart, predicted continued volatility for Nifty, cautioning that further declines are possible based on recent trends. Market sentiment remains cautious, with many traders staying on the sidelines after recent declines.
Options Positioning:
Sudeep Shah, Head of Derivative and Technical Research at SBI Securities, highlighted significant open interest buildup at the 24,000 and 24,250 strikes, with heavy put writing at 23,900 and 23,700 strikes.
Levels to Watch:
Shah pointed out that if Nifty stays below its day low, the 23,750-23,800 zone, aligning with the 50-day moving average, will likely act as the next support level, followed by 23,550.
Mantri anticipates the market will stay in consolidation for the next few days, with support around 23,550-23,600 and resistance at 24,300-24,350. Traders might consider buying around 23,700-23,750, which is expected to be strong support, with 23,500 as a lower boundary.
The rising India VIX remains a major concern amid global tensions, keeping short-term traders active. Managing risks is crucial, as intensified global market sell-offs could be on the horizon, according to market experts.
Bank Nifty Outlook:
Mantri expects Bank Nifty to outperform Nifty in the near term. The index is near the 100 EMA at 49,840, with immediate support at 49,200-49,300. Aggressive traders might consider entering around 49,500, which could provide good support, with a stop loss below 49,200.
