Fear among investors growing? October series F&O rollover less than 3-month average

September derivative series ended 6.52% lower on expiry as volatility surged, wiping out gains made in the previous series. With this, a lower number of rollovers were witnessed to the October series, at just 71% against the three-month average of 78%. “September series ended on panic mode for bulls as Nifty nosedived ~3% for the day (Thursday) to close the penultimate session at 10,805 mark, massive unwinding of puts positions seen as short gamma traders were trapped on wrong foot,” brokerage and research firm Yes Securities said in a note. 

The previous three consecutive series saw positive movement, before the September series slipped following a global sell-off. The fall was aided by a number of reasons. “Index was moving in range for the first three weeks of the series but fell sharply in the last week due to change in Global sentiment and concern over Covid – 19 cases. Nifty has seen a negative crossover on a weekly scale after 23 weeks which has Bearish implications for the market sentiment,” said Chandan Taparia, Derivative & Technical Analyst, Motilal Oswal. September series saw Nifty slip expiry on expiry for the first time in four months.

During the series, volatility gained 24% to end above 23 levels, hinting a renewed fear among investors on Dalal Street. The surge in volatility comes after five months of dropping expiry on expiry. “The Nifty witnessed continued weakness due to negative global cues and persistent selling from FIIs and closed the series at the lows of the month,” said analysts at ICICI Direct. They noted that even stocks from the technology space, which were able to hold the index have witnessed significant liquidation and closed near the days low along with the Banking and energy heavyweights. “Considering continued liquidation of positions, the open interest in Nifty is significantly low and bias remains negative,” they added. 

Further, Yes Securities advised investors to stick with “Low Risk strategy likely to be profitable on any sharp pullback while max loss limited to ~35 points on expiry above 11,000 mark for October series.” 

For the October series, “Maximum Put OI is at 10500 followed by 10000 strike, while maximum Call OI is at 11500 followed by 12000 strike. We have seen marginal Call writing in 11000 and 11300 strike while Put writing is seen at 10600 then 10500 strike. Option data suggests a wider trading range in between 10300 to 11500 zones,” said Chandan Taparia.