Nifty option sellers have baked in a 4.9 per cent movement in the benchmark index from current level of around 11,700 immediately after the poll results on May 23. That’s a 570-point movement either-side from 11,700. If the
NDA wins comfortably, markets could potentially test 12,270 and if there’s an upset, the benchmark could correct to 11,130.
The fact that Nifty is around the same level (11,738) as it was at the beginning of the current series means option sellers have held sway over option buyers. Implied
volatility of the options has risen.
The 4.9 per cent move is based on the provisional price of the May 30
expiry 11,700 straddle – combined call and put – at Rs 570 at closing on Wednesday. This is the price being demanded by option sellers who feel the range of the market post the outcome would be 11,100-12,300.
The sellers have also catered for demand for more calls than puts on the May 30 expiry, which means retail traders have jumped onto the “positive bandwagon,” said Chandan Taparia, derivatives analyst at Motilal Oswal Financial Services.
This is borne by the open interest-based put-call ratio (PCR) of Nifty May 30 expiry which was 0.8. The maximum resistance for the market kicks in at 12,000 and the strongest support at 11,000 for the current series.
Some analysts also expect the market to correct closer to the expiry once the event is over. Nitin Kedia of Kedia Commodity said certain sellers of the 11700 straddle had hedged themselves by purchasing an 11700 put and a 12500 call. This implies they think odds of a downside are greater.