market momentum faltering ?

kkseal · #41 6th December 2006, 01:55 PM

Here's some mkt data for 5th Dec 06 :-

Nifty Futures add 6.3 lakh shares in Open Interest
Nifty Futures premium down to 4 points

What does it mean?

My interpretations :-

More short position build up (since open interests have risen while premium is down)
Will be confirmed by Options data i.e. rise in Put options (open int) with a corresponding rise in PC ratio.

Now here is the Options data :-

Nifty Calls add 6.8 lakh shares in Open Interest; Puts add 11.7 lakh shares
Nifty Open Interest Put-Call ratio up to 1.59 from 1.58

Conclusion : Near term outlook bearish

Thanks,
Kalyan.

Agilent · #42 6th December 2006, 03:19 PM

Quote:

Originally Posted by kkseal

Now here is the Options data :-

Nifty Calls add 6.8 lakh shares in Open Interest; Puts add 11.7 lakh shares
Nifty Open Interest Put-Call ratio up to 1.59 from 1.58

Conclusion : Near term outlook bearish

Thanks,
Kalyan.

The stats is insufficient and potentially misleading : they shd give the value in crores rather than merely no of shares

One Infy share is equal to almost 10 HLL (value wise)

So ... hypothetically .. what if all new calls are Infy whilst all new puts are HLL ?

Get my point ?

As for the PC ratio, the variation is too minor to have any meaning. (Also, Im not sure if the ratio takes into account only no. of shares, or value .... if the former, then it is meaningless)

{Hope i m not missing something .... Ivan/Vince/Aca .... am i right ?}

AGILENT

kkseal · #43 6th December 2006, 03:22 PM

At the same time
The NSE cash turnover was at Rs 8783.45 crore and the NSE F&O turnover was at Rs 25815.55 crore. (i.e. Lev Ratio well below 4) => No excessive leveraging
NSE Advance Decline ratio at 4:5 => Fear still rules greed

Mkts could still fall (under its own weight) once the buying stops. First on low volumes then with increasing volumes as the stop-losses start getting triggered.
But even if mkts were to reverse at this stage, the fall would be less than the one in May as this time people will have the cash to buyback at lower levels (i understand MFs are also sitting on some cash garnered from NFOs). Also less of a forced sell-off to pay for MtoM calls.

So this is a cushion we have as of now.

Regards,
Kalyan.

Agilent · #44 6th December 2006, 03:25 PM

Quote:

Originally Posted by Agilent

The stats is insufficient and potentially misleading : they shd give the value in crores rather than merely no of shares

One Infy share is equal to almost 10 HLL (value wise)

So ... hypothetically .. what if all new calls are Infy whilst all new puts are HLL ?

Get my point ?

As for the PC ratio, the variation is too minor to have any meaning. (Also, Im not sure if the ratio takes into account only no. of shares, or value .... if the former, then it is meaningless)

{Hope i m not missing something .... Ivan/Vince/Aca .... am i right ?}

AGILENT

KKS

Yr last post crossed mine in transit ... so maybe you missed out mine

AGILENT

kkseal · #45 6th December 2006, 03:34 PM

Quote:

Originally Posted by Agilent

The stats is insufficient and potentially misleading : they shd give the value in crores rather than merely no of shares

One Infy share is equal to almost 10 HLL (value wise)

So ... hypothetically .. what if all new calls are Infy whilst all new puts are HLL ?

Get my point ?

As for the PC ratio, the variation is too minor to have any meaning. (Also, Im not sure if the ratio takes into account only no. of shares, or value .... if the former, then it is meaningless)

{Hope i m not missing something .... Ivan/Vince/Aca .... am i right ?}

AGILENT

The Put-Call values are that of the NIFTY alone (it states how much NIFTY Puts have been bought as compared to Calls) So how does Infy, HLL come in here?

Off course as i have stated in one of my previous posts a PC Ratio of the STOCK Put & Call options would be a better indicator of market sentiments than the NIFTY PC Ratio which is somewhat distorted by the hedging factor.

But i haven't been able to locate the statistics for the same anywhere (including NSE site). So have to make do with what data is available.

Regards,
Kalyan.

Agilent · #46 6th December 2006, 03:45 PM

Quote:

Originally Posted by kkseal

The Put-Call values are that of the NIFTY alone (it states how much NIFTY Puts have been bought as compared to Calls) So how does Infy, HLL come in here?

Regards,
Kalyan.

Noted. Thanks .

What is intereting , then , is that despite a PC ratio of over 1.5, markets have been rising frantically.

Only shows how many NIFTY put buyers are getting poorer by the hour !

AGILENT

kkseal · #47 6th December 2006, 03:54 PM

Also the diff between put & calls looks a lot lower when you consider the value (turnover/open int) instead of no. of shares. This shows that the Call options carry a higher premium than Put options. This would be expected with Nifty still quoting at a premium to spot (as of 5th Dec 06).

Thanks,
Kalyan.

kkseal · #48 6th December 2006, 03:59 PM

Quote:

Originally Posted by Agilent

Noted. Thanks .

What is intereting , then , is that despite a PC ratio of over 1.5, markets have been rising frantically.

Only shows how many NIFTY put buyers are getting poorer by the hour !

AGILENT

Could be just due to hedging you know. These funds - they have a lot more at stake than smaller fries like us so they keep hedging their long positions in stocks through Index Puts to mitigate risks. (And that is also where the distortion comes).

Regards,
Kalyan.

kkseal · #49 6th December 2006, 07:39 PM

Hi All,

Here's something interesting i found on the net :--

While it is important to see open interest as an indicator, investors need to remember that in isolation it can be quite misleading. Open interest needs to be understood in respect to cost of carry which shows the trend of premium/ discount of futures over spot.

For example, if open interest increases in a stock along with an increase in cost of carry, it implies long accumulation in the stock.
Conversely, if open interest decreases in a stock along with increase in cost of carry, it indicates short covering which is also a positive indicator for long traders.

If open interest increases with decrease in cost of carry, it implies buildup of short positions*
and if open interest decreases with decrease in cost of carry, it implies long unwinding, both of which are positive indicators for a short trader.

Happy Trading,
Kalyan.

* yesterday's case
NIFTY traders just substitute NIFTY/Index for stock.

kkseal · #50 6th December 2006, 08:54 PM

6th Dec Data (taken from Karvy site) :-

The NSE cash turnover was at Rs 8689.07 crore and the NSE F&O turnover was at Rs 32053.87 crore. (-)

Nifty December futures premium of 2.90 points converts into a discount of 6.85 points. Futures add 13 lakh shares in open interest. (-)

Nifty Put Call ratio of open interest decreases to 1.50 from
1.57. (+)

Nifty Put and Call options add 13 lakh shares in open interest respectively. (=)

Implied volatility of Nifty Put options increases to 25.78%
from 25.55%, while implied volatility of Nifty Call options
decreases to 19.77% from 21.53%.

=> Put premiums increasing i.e. Put's getting costlier; vice versa for Calls.

NSE Advance Decline ratio at 2:5

Overall :

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