Stock market wrap: Rajesh Sriwastava, a Bengaluru-based derivative trader who had taken a short position Adani Enterprises, is maintaining his position. He said he has not noticed many shorts being covered.
Traders who had taken a position on Adani Group stocks in the futures and options (F&O) market on February 3 had a tough day managing the volatility as the stocks saw a roller coaster ride.
Initially, as Adani Enterprises plunged 35 percent, traders shifted their position to 1,000 and 1,100 strikes, especially call writers. However, a swift and sharp recovery created a squeeze for them.
Bars reflect change in OI during the day. Red bars show call option OI and green put option OI.
As of the close of the market, put writers maintained their position deep out-of-the-money options with the highest fresh put writing at 1,200 strike. A part of this could also be due to hedging by traders. 1,500 strike saw heavy call writing as that was the battle zone at the time of close.
Delivery volumes were nearly 2.5 times higher than the last five day’s average for the stock. Higher than-average delivery shows the intensity of price action. According to this data, the overall setup remains weak for the stock.
Rajesh Sriwastava, a Bengaluru-based derivative trader who had taken a short position on the stock, is maintaining his position. He said he has not noticed many shorts being covered.
The market also gave ample arbitrage opportunities to traders as the stock price had a gap between both exchanges – BSE and NSE. Even at the close, while the stock closed in the red on NSE – down 2 percent – on BSE it was over a percent higher.
Adani Ports, which showed strength, especially after brokerages and credit rating agencies commented in its favour, saw put and call unwinding for all strikes. Most of the put unwinding was seen at 450 strike and call unwinding at 500 strike.
Bars reflect change in OI during the day. Red bars show call option OI and green put option OI.
Delivery volume was also about 1.5 times higher than the last five-day average. With rising prices, this signals a positive setup going ahead.
In ACC, the cement maker owned by Adani Group, traders also shifted their positions higher and unwinded their positions at lower strikes. A similar story played out with Ambuja Cements.
Among other stocks, traders noticed some metal stocks are looking attractive now.
“Among stocks with the highest OI gain today, Tata Steel saw a big increase in open interest with 3,696,000 contracts getting added, and is also looking good on the charts for the near term,” said Rahul Ghose, Founder & CEO, Hedged, an algorithm-powered advisory platform. “It is also on the verge of forming a bullish candlestick pattern further corroborating the same direction of move.