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Mumbai: The rise in loan to value permitted by RBI for loans against gold jewellery advanced by banks led to huge shorting in the Muthoot Finance counter. The open interest (OI) of the front month contract jumped 29% as its price tumbled almost 9% to Rs 1215.95 from the intraday high of 1332.5.
Rise in OI accompanied by falling price indicates shorting.
The activity in the options counter indicates the share could trade over a massive 25% range from Rs 1048- 1352 in the current month from the current level of 1200. Based on Thursday's derivatives activity, the bias is toward the downside.
The straddle value -- value of call and put at 1200 level -- is Rs 152 a share (750 shares make one contract) or 12.6%. The option writers will gain the entire sum if Muthoot expires this month at 1200 . Each point above or below 1200 reduces the writer's profit until the upper or lower breakeven points . Any break of the 1048-1352 range could lead to unlimited loss for the option writers.
The rise in LTV for banks -- SCBs and cooperatives -- to 90% from 70% till March 2021 could attract more households to these banks, believe analysts.
Rise in OI accompanied by falling price indicates shorting.
The activity in the options counter indicates the share could trade over a massive 25% range from Rs 1048- 1352 in the current month from the current level of 1200. Based on Thursday's derivatives activity, the bias is toward the downside.
The straddle value -- value of call and put at 1200 level -- is Rs 152 a share (750 shares make one contract) or 12.6%. The option writers will gain the entire sum if Muthoot expires this month at 1200 . Each point above or below 1200 reduces the writer's profit until the upper or lower breakeven points . Any break of the 1048-1352 range could lead to unlimited loss for the option writers.
The rise in LTV for banks -- SCBs and cooperatives -- to 90% from 70% till March 2021 could attract more households to these banks, believe analysts.