01Cold open: every signal moved up, then the market closed on its low
On Friday, every single positioning signal on the options board moved the same way, and every one of them moved up. Calls were bought back, puts were written, volatility was crushed. The professional desk flipped long. Retail stopped selling puts for the first time in six sessions, and that is new. Then the market closed on its low. And this morning we open 35 points lower.
02Friday's tape: the headline hides everything
The Nifty finished 23,897, up a tenth of a percent. That headline hides everything. At 11:30 it was 24,005. By the close it had given back 108 points and finished 1.85 points off its own low. The Sensex was worse: it closed at 76,515 and that closing price was also the exact low for the day, 367 points below the afternoon's high. So for the fourth time in ten sessions an index has printed its high or its low and its closing number is the same as that extreme. India VIX fell to 10.61, down 6.44 percent, and under 11 for the first time in this September series. But look at what led: Sensex plus 0.48, Nifty plus 0.10, Bank Nifty minus 0.02, Next Nifty 50 minus 0.23, Midcap Select minus 0.31, Realty minus 0.66 after being the best sector on Thursday at plus 2.58. The large caps led, the broader market did not. That is the reverse of Thursday, and it is why my rotation call on Friday was wrong.
03The cables complex broke
One sector, one industry, got hammered on Friday. That is cables. KEI was minus 8.95 on 1,173 crore of turnover. Polycab minus 5.76, RR Kabel minus 6.25, Dynamic Cables minus 10.36. Finolex, Havells, Universal, Precision Wires and Apar all followed. Nine names in one industry, one afternoon, on real money. I am not going to invent a reason for it. But what I can tell you is the shape, and the shape is what it looks like when everybody wants out of the same thing, of the same industry, at the same time.
EP119 in 7 topics
04The board: the biggest one day PCR jump of the run
Nifty call open interest fell by 1.07 crore and put open interest rose by 2.90 crore. The PCR went from 0.656 to 0.844, the biggest one day jump of this run. And strike by strike it is cleaner still. 24,000 lost 32 lakh calls, 23,900 lost 27 lakh calls. Meanwhile 23,900 gained 42 lakh puts, 23,800 gained 39 lakh puts and 23,950 gained 31 lakh puts. On Thursday 24,000 took 96 lakh calls in one single session; on Friday a third of that came straight back off. The sellers walked down the call side and up the put side, and they did it all day.
05Three things at one price
Max pain moved up to 24,000, the gamma flip moved to 24,000, and 24,000 is still the heaviest call strike at 1.51 crore. Three separate things all at the same price, 102 points above where we closed. Which also means we are 102 points inside the negative gamma zone, where on Thursday we were only 27 points inside it. The unstable region got wider, not narrower. Volatility under 9 percent gives a one standard deviation range of 110 points for the day. And the September future closed at 24,048, a basis of 150 points. The run is 34.50, then 85, then 126, and now 150. Three sessions of futures pricing a higher market than the cash, and the cash has not validated it once.
06Who did what: the seventh flip in eleven sessions
The professional desks flipped to net long index calls, plus 74,000 from minus 74,000, a swing of 1 lakh 48,000 contracts. That is the seventh flip in 11 sessions and the biggest of them. Retail bought back 85,000 puts, the first reduction after six straight sessions of building that book. And then the one book that did not turn: the FII index futures short went to 2,35,838, another run high. Everything else flipped bullish on Friday and that short got bigger. In cash they sold 3,111 crore against 8,930 crore of domestic buying, and sold 9,903 crore of index options, the heaviest of the week.
Chapter 7 of 7, about 3:12 of the 10:18
07The receipt, and the plan: the question is 23,900, not 24,000
First a correction. On Thursday I gave an iron fly as a credit of 144.50 with a max loss of 55.50. Against the official settlement close it is a credit of 140.65 and a max loss of 59.35, with breakevens at 23,859 and 24,140. The position is up 14 points after Friday with two sessions to run. A naked 24,000 straddle made 47 over the same day, so the wings cost me 34 points on Friday. On Thursday the same wings saved me 34 points. Saved 34, cost 34, on consecutive days. That is the whole argument for defined risk in two numbers: you pay for the ceiling every single day, and you only notice it on the one day when it saves you. This morning Asia is split down the middle, the KOSPI plus 2.88, the Nikkei plus 2.30 and Taiwan plus 1.42 against Hang Seng minus 0.81 and Singapore minus 0.5. That is the North Asia semiconductor complex moving on its own and we are not in it. America closed lower, the Dow futures are down another 0.29 percent, and every Indian ADR except two finished lower with Infosys minus 3.23. GIFT is at 23,976, putting us near 23,850 to 23,880, below 23,900, which changes the first question of the day. It is not whether we take 24,000, it is whether we get back and stay above 23,900. That strike is the heaviest put on the board at 1.11 crore, and 41 lakh of them were written on Friday afternoon: open underneath it and every one of those writers is on the wrong side of their own strike. Resistance 24,000 then 24,100, support 23,900 then 23,820, band 23,800 to 24,000. I am holding the iron fly into Tuesday. And do not chase the first 15 minutes of the gap down, trade only after 9:30.
