The Derivatives Denizen

Your one stop derivatives guide.

Feb 29, 2004

Markets disappoint bulls. Positions unwound on both sides.

February contracts end with a whimper.

The markets have slid lower even as the bears have squared up their short positions, the bulls have failed to enhance their commitments significantly. Retail interest is seen waning and the undertone is nervous. The action revolves around the 1750 - 1810 band on the Nifty. It is important for the markets that these levels hold for now, if a further slide is to be averted. We feel the outstanding positions will hold the key - especially on the index heavy-weights. As we had advocated last week, it is time for absolute caution.

Market internals - outstandings

Description	Rupees crores	Call options	Put options	Net position
Index Futures	1456
Stock futures	4545
Index options		231	84	147
Stock options		592	167	425
Total Futures	6001	Total options - net	572
Gross longs ( F+O )	6824	Net longs ( F+O )	6252

Observation - The outstanding long positions have shrunk considerably which indicates that the bulls have squared up their February long positions and preferred not rolling forward a majority of their trades. There is caution in the undertone and the sentiment remains brittle. Click here to view previous weeks file

Note - Previous weekend gross long positions Rs 9,070 crs, net long positions Rs 8,134 crs.

Source - The National Stock Exchange.

PCR - Index	0.37 : 1	Previous week	0.82 : 1
PCR - Stocks	0.24 : 1	Previous week	0.28 : 1
PCR - Total	0.25 : 1	Previous week	0.31 : 1

Observation - The PCR shows a tilt towards the bulls as the ratios are showing squaring up of short positions on a week-on-week basis. The total PCR still remains positive. The equilibrium point is 0.50 : 1. Though this is a positive indicator, the critical mass is lacking. A sustained build up of bullishness will bring the retail traders back in the fray. Open interest and traded volumes will hold the key. Click here to view previous weeks file.

Source - The National Stock Exchange.

Market internals - Nifty put / call trends - 5 highest open interest contracts

Calls	Previous week Rs Crs	Current Rs crores	Change Rs Crs
Mar 1800 CE	23	75	52
Mar 1850 CE	49	41	08
Mar 1900 CE	114	27	87
Mar 1780 CE	02	20	18
Mar 1820 CE	11	14	03
Puts	Previous week Rs Crs	Current Rs crores	Change Rs Crs
Mar 1800 PE	74	28	46
Mar 1750 PE	31	23	08
Mar 1780 PE	14	08	06
Mar 1850 PE	48	06	42
Mar 1900 PE	37	04	33

Observation - The index contracts show which way the players are tilting. The outstanding short positions seem to have decreased all round, on short covering. The fact that the 1800 & 1850 series has seen significant bear covering, chances are the markets will remain between the 1800 - 1850 band in the coming days.  The increase in long positions has come at the 1800 strike. Our inference remains the same as last week - watch the 1800 levels for trend determination. Click here to view previous weeks file

Source - The National Stock Exchange.

5 Highest outstanding scrips

Futures	Previous week Rs Crs	Current Rs. Crores	Change Rs Crs
Tisco	616	534	82
Reliance	308	374	66
SBI	410	340	70
Telco	319	275	44
Ranbaxy	258	202	56
Options	Previous week Rs Crs	Current Rs. Crores	Change Rs Crs
Telco 520 calls	19	22	03
Tisco 450 calls	49	19	30
Tisco 430 calls	29	18	11
Reliance 560 calls	09	18	09
Telco 540 calls	36	18	18

Observation - The action remains polarised around the same big five counters, however, outstanding open interest in all the stocks has shrunk - Barring Reliance which is rapidly over shadowing Tisco & Telco. Reliance being heavily weighted in the indices is likely to determine the market trends in the coming days. A major move is expected from this counter in either direction in the near term. Our investors will recollect we had advocated a similar prediction on Telco based on these parameters and the counter has been major loser on a week-on-week basis. Click here to view previous weeks file.

Most active calls - top 10

Most active puts - top 10

Source - The National Stock Exchange.

We have beefed up the volatility section to include all scrips in the study !! Volatility is a F&O traders best friend. We have split the volatility readings of the stocks in two segments - above the market average and below the market average. It is obvious that higher than average volatility will see a larger move in either direction and therefore benefit a savvy trader. It is wider to avoid those stocks which show lower volatility readings if you want short term profits. Keep watching this space for regular updates.  

Observation - Our investors are advised to watch the above highly volatile counters for signs of a bounce-back. However, other factors too need to be taken into account before a fresh trade is initiated. Note how the volatility is coming down across the board - a sign of the markets settling down at lower levels.

Index heavy-weights - aggregate volatility

Scrip	Underlying Vol	Underlying annual vol	Futures vol	Futures annual vol
Hind Lever	1.86	35.72	1.86	35.72
ITC	1.91	36.65	1.91	36.65
Reliance	2.09	40	2.19	41.98
Infosys	2.11	40.44	2.2	42.16
Wipro	2.36	45.19	2.4	46.02
Average vol	2.06	39.6	2.11	40.50

 

Indices - volatility

Scrip	Underlying Vol	Underlying annual vol	Futures vol	Futures annual vol
CNX IT	2.07	39.65	2.19	41.87
Nifty 50	1.76	33.78	1.82	34.77
Average vol	1.91	36.71	2.00	38.32

 

Source - The National Stock Exchange.

Changes in outstanding futures positions.

NSE futures saturation list		Daily change		Futures change in open interest over previous day
Arvind Mills	84 %	04 %		ACC ++	1,14,000
Canbank	57 %	00 %		Andhra Bank	1,47,200
Maruti	67 %	01 %		Arvind Mills	7,61,100
NIIT	66 %	01 %		Bank of Baroda	1,51,200
Polaris	65 %	02 %		Bank of India	5,62,400
SCI	83 %	01 %		BSES	1,03,400
Tata Power	66 %	02 %		GAIL ++	5,76,000
Tisco	79 %	01 %		Guj Amb Cem	4,57,600
				Hero Honda	1,29,600
				Hind Lever ++	1,77,000
				HPCL	1,07,900
				ICICI ++	1,14,800
				IPCL ++	7,45,800
				Maruti	1,68,000
				NIIT	1,24,500
				Oriental Bank	1,78,800
				Polaris	2,56,200
				Reliance ++	3,17,400
				Satyam Comp ++	4,82,400
				SBI ++	3,76,000
				SCI ++	1,05,600
				Tata Power ++	3,21,600
				Tisco ++	2,93,400
				Union Bank	1,72,200
				CNX IT	3,540
				Nifty +++	1,76,800
Index longs	12,61,000			Nifty shorts	4,68,820

Stars of the day

Stock	Open interest	Stock price	Outlook
Arvind	Up	Down
GAIL	Up	Up
IPCL	Up	Up
Reliance	Up	Up

 

Note - +++ signifies higher open interest in the February, March & April series simultaneously. Click here to view previous weeks file

 

Source - The National Stock Exchange

Have a profitable day.

 

Vijay L. Bhambwani

Ceo :- Bsplindia.com

The author is a Mumbai  based investment consultant and invites feedback at Vijay@BSPLindia.com and  (022) 23438482 / 23400345.

SEBI disclosure -  The author has no positions in  the stocks mentioned above.

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