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Nifty likely to stay in 10,750-11,250 range in August

The seller makes maximum profit of Rs 274 a share if the Nifty expires at 11,000.

, ET Bureau|
Aug 15, 2019, 08.04 AM IST
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A 500-odd point range is within which the market will trade before breaking out or down.
Mumbai: Traders expect the market to trade in a 250-270-point range either side until expiry of the current derivatives series on August 29 from the current level around 11,000. That’s borne out by option sellers having maximum open positions (OI) at the 11,000-strike call and put expiring on August 29. Normally, maximum OI at a single strike is witnessed at the beginning of a series, if at all.

The provisional OI of the 11,000 put was 37.22 lakh shares on August 14, while that of the 11,000 call was 24.52 lakh shares.
nifty-grph

The provisional price of the 11,000 call and put at Wednesday closing was a combined Rs 274 a share (75 shares make one contract). That means sellers of the call and put (straddle) expect the market to veer in a 10,726-11,274 range until expiry.

“For now, it looks like the market will stick to a 10,750-11,250 range,” said Chandan Taparia, derivatives analyst, Motilal Oswal Financial Services. “Only a decisive breakout from this range will determine where we are headed.”

Amit Gupta, derivatives head at ICICI Securities agrees. “A 500-odd point range is within which the market will trade before breaking out or down.”

The market, due to fears of a structural slowdown, has fallen 9 per cent from the record high of 12,103 on June 3 to 11,029 on August 14.

The seller makes maximum profit of Rs 274 a share if the Nifty expires at 11,000. Each point above or below that reduces the profit until the index hits 11,274 (upper breakeven point) or 10,726 (lower breakeven point). Above or below this, sellers begin to face losses.

But, the odds of retaining premium are higher as the market might veer in this range or might not break out of it , according to Nitin Kedia of Kedia Commodity.

That things don’t look like falling off a cliff for now are the relatively low rise in fear gauge Vix from 15.97 on June 3 when market hit a record high to 16.36 on August 14.

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