Call writers compelled to unwind positions on expiry day: Angel Broking
Derivatives Wrap-up by Mr. Ruchit Jain (Senior Analyst - Technical and Derivatives, Angel Broking):
"Nifty started trading for the weekly expiry session on a flat note around 9850. However, the index then inched higher till noon and approached the resistance of 10000. A sharp upmove was seen as the Nifty surpassed this resistance and the index continued the momentum to end the session tad below 10100, marking gains of more than a couple of percent.
Post the news of the India China border dispute, there was a good amount of open interest addition in the 10000 call option in the weekly as well as the June monthly expiry, indicating that the market participants were not expecting this hurdle to be crossed soon. On the flip side, 9700-9500 put options too have been attracting writers which was a support base. After a gradual upmove, the index surpassed the 10000 mark post noon which jeopardized the option writers. They ran to cover their positions which then led to a sharp move in the last hour and as a result, the index even tested the 10100 mark. Bank Nifty index too rallied almost 1000 points from its morning lows as the call writers squared off their positions. In futures, segment fresh long formation was seen in both the indices as the price upmove was supported by rise in open interest.
Now, if we look at the options data of the coming week which is the monthly expiry, open interest addition has been seen in 9900-9800 put options which indicates that the support has probably shifted higher from 9500 to 9800 now. Since there's long build up seen in futures segment, we expect the index to continue the upmove towards 10300-10500 zone. Hence, traders are advised to trade with a positive bias and use any decline as a buying opportunity."