Derivative Insights - May 19, 2020 - Geojit

The Nifty May futures closed at 8825.85 with a loss of 3.41% or 311.25 points on Monday. Open interest of the current month expiry increased by 1.73 lakh shares indicating addition of short positions in the markets. Nifty future traded at premium of 2.6 points against a premium of 0.25 point on Friday. Nifty's VIX jumped nearly 8% to close the day at 40.9150 versus 38.0175 on the previous day. FIIs were sellers for in the F&O segment for straight five days; sold derivatives worth Rs 1938.13cr on 18 May as per provisional figures. On the open interest front, FIIs continued to increase short positions in future index; added exposure by 27.31% yesterday while reduced future index longs by 3.52%.

Nifty Outlook

FIIs have piled on to the index future shorts, while also adding 20% to call shorts. This has taken the proportion of index future longs to a critically low level, but on the option side, the positive bets are not yet too low. With yesterday's fall, the 9000 strike has replaced 10000 as the second most active strike among calls, but the 9500 strike, despite five strikes OTM, is still the most active strike, indicating the short positioning is not quite sticky to spot, and looks to be more of a theta play. This is consistent with our view that a directional downside is less likely. For now, the most encouraging aspect is that total OI of the market is improving.

Source : Equity Bulls

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