03 Jul ’23 Post Mortem on Nifty & BankNifty | Unusual 500% jumps in FinNifty CALLS
Before we discuss the daily analysis, let me pull up the huge explosive jump in Finnifty CE prices. Usually, I dont bore you with FinNifty charts or numbers unless its expiry day, but today requires some real attention!
This screenshot was taken at 13.09 today, with just 1 more day to expiry the jump in premiums was hugely unusual. Agreed Finnifty was up 1.25% by that time. But the far OTMs premiums jumping 300 to 500% & that too CALLS — unexplainable.
Since Finnifty is not used to trade with so much volatility, most of the positional option traders would have taken a huge hit today. If it were banknifty — we all understand the beast that it is.
Nifty Daily Analysis
Another island formation by N50, gap up opening of 68+ points and then a rising with strong momentum. I was eagerly waiting for a pullback to take some contra positions. Although we had a small retracement from 10.30 to 11.20 approx 78pts — there was no follow-through.
So the only viable option trade was selling the PUTS. This is the 4th consecutive day where N50 is jumping gaps & never closing them intraday — pure island formations.
Usually when we have multi year breakouts & sentiment shifts we get to see consecutive breakaway gaps.
India VIX had an intraday LOD to HOD swing range of 11.4%, it was hovering between 8 to 9% higher than the previous working day. Quite unusual to have high VIX when the markets are powering through nil resistances.
I may be the only analyst who feels an interim top is getting formed at the current levels give or take 50–80pts. The rationale being, we have run out of gas. If the momentum has to continue — it has to come from NiftyIT and it has to come fast.
We cannot stay at these levels without pure momentum, otherwise the bears will start their game!
1hr TF
The island formations in blue color. The area that I personally feel may be an interim top 19334. Again I am okay to be proven wrong if we have further island formations! Even though I might feel a top is getting formed, I have not taken any bearish bets nor should you! As an option trader it is best to react to the market once it makes its move rather than predicting it.
BankNifty Daily Analysis
BN had a different style of price action today comparing with N50. The open was gap-up & the rush to hit the HOD at 09.55 was similar. But what followed from there had minor changes.
- The fall of 0.69% ~ 312pts from the top did have an impact on the momentum
- Unlike N50, BN did not persist at the HOD levels after the first retracement. N50 had 3 more attempts at the top, it even ended at the top. One of the reason would be surge in stocks like ITC & RELIANCE which are not part of BN.
From the options flow I could not detect any aggressive shorts getting written for BN unlike N50 — so I am not calling a top for BN today!
Tomorrow’s Finnifty expiry might really set the tone for banknifty as well. And the HDFC-HDFCBK merger, delisting & relisting has to be contained. If HDFCBK assumes 44 to 46% in banknifty & Finnifty — it wont look good from an index management perspective. Quite sure the officials will do something on it soon.
1hr TF
Today’s island formation really stands out, unlike N50 the other 3 days are not perfect islands as BN has closed the gaps quite cleanly.
The nearest support is at 44068 ie 1100pts below. These are uncharted territory & the price behavior could get even more volatile. Always remember to wear your options trading seat-belts for BN 🙂
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